Spanish succession tax in the Balearics

Spanish succession and gift tax (SSGT) key facts:

SSGT applies to inheritances and lifetime gifts. It is due when the beneficiary is resident in Spain, or the asset being gifted or inherited is a Spanish asset. It is charged on each recipient. Beneficiaries are divided into groups:

• Group I – children and other descendants under 21
• Group II – descendants over 21, parents, spouses
• Group III – siblings, cousins, aunts/uncles, nieces/nephews, in-laws, stepchildren
• Group IV – everyone else

The tax rates and allowances are determined by the state each year, but the regions can make them more beneficial for local residents.

Balearics succession tax reforms

With effect from 18 July 2023, the following deductions are available for inheritances and gifts for Spanish tax residents:

• The succession tax liability is reduced by 100% for group I and II beneficiaries – children, parents and spouses will not pay any tax.
• Where there are no descendants, the succession tax liability is reduced by 50% for siblings, uncles, aunts, nephews and nieces, and by 25% for the rest of group III beneficiaries (provided the deceased did not have other descendants).

Other beneficiaries

The other rates and reductions have not changed. Under the Balearics rules, group III beneficiaries generally receive a personal reduction of €8,000, while group IV €1,000.

The tax rates start at 7.65% for inheritances up to €8,000 and rise progressively to 34% for amounts over €800,000. Multipliers based on kinship and pre-existing wealth can increase the liability.
Unmarried couples within a stable relationship are treated as spouses, for tax purposes, provided this is officially registered.

The main home reduction can be extended beyond group I and II beneficiaries if recipients are over 65 and lived with the deceased for 2 years before death.

Estate planning

You also need to be aware that Spain’s succession law imposes ‘forced heirship’; under Spanish law you cannot leave everything to your spouse. This applies to foreign nationals living here by default, but you can use the European Succession Regulation to opt for the succession law of your country of nationality to apply on your death.

Every family is different. Take advice based on your situation and objectives, to help ensure your estate is divided as you wish and with as little tax and bureaucracy as possible.

Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice.

Keep up to date on the financial issues that may affect you on the Blevins Franks news page at www.blevinsfranks.com