Since July 2023 a line has circulated in the islands that is almost exact, and dangerous for that reason: in the Balearics there is no inheritance tax between parents and children. The relief is real, it is among the most generous in Spain and it has no upper limit, but it is a reduction of the tax due subject to conditions, not an automatic exemption. An heir who fails to file, or who declares the wrong value for the property, can lose it.
What the Balearic rules actually relieve
Decreto ley 4/2023, of 18 July, amended Decreto Legislativo 1/2014, the consolidated text of the regional rules on taxes assigned by the State, and introduced a 100 per cent reduction of the adjusted gross tax due on acquisitions on death by groups I and II, that is, descendants and adopted children of any age, spouses, ascendants and adoptive parents. The relief also extends, by assimilation, to acquisitions arising from the pactos sucesorios (succession agreements) governed by Ley 8/2022 on voluntary contractual succession in the Balearic Islands.
The rules attach a substantive condition worth emphasising. Where real estate is acquired, its value must be stated in the notarial deed, and that value may not exceed the real value of the assets. Nor does the relief remove the duty to file: the resulting liability is nil, but the formal obligation remains.
Collateral relatives: 50 and 25 per cent
For collateral blood relatives of the second and third degree, meaning siblings, uncles, aunts, nieces and nephews within group III, the relief is 50 per cent where the deceased left no descendants or adopted children, and 25 per cent in all other cases. The difference therefore turns on a circumstance entirely outside the heir's own position, which makes it advisable to establish the full family tree before relying on any estimate of the tax due.
Lifetime gifts since July 2025
Ley 6/2025, the regional budget act published in the Official Gazette of the Balearic Islands on 24 July 2025, extended equivalent treatment to lifetime transfers, with effect for taxable events arising from 25 July 2025. It grants a 100 per cent deduction from the net tax due on gifts to a spouse, ascendants and descendants, 60 per cent where the recipient is a collateral blood relative of the second or third degree, and 35 per cent on gifts to ascendants and descendants by affinity.
For gifts of real estate the valuation condition is stricter than on death: the value stated in the deed may not exceed the valor de referencia (the reference value set by the cadastre) increased by 20 per cent or, where no reference value exists or cannot be certified by the cadastre, the market value. Failure to meet this condition does not simply cancel the benefit on gifts to a spouse, ascendants or descendants, but downgrades it: the deduction is then computed by reducing the net tax due by 7 per cent of the taxable base.
Non-residents can also apply the Balearic rules
The original 2023 wording confined the relief to taxpayers subject on a worldwide basis, which excluded non-resident heirs and raised a compatibility issue under European Union law of the kind already identified by the Court of Justice in its judgment of 3 September 2014, case C-127/12. Ley 11/2023 corrected the defect by adding a provision to the consolidated text referring to the connecting factors in the second additional provision of Ley 29/1987, and Ley 6/2025 has since removed the reference to worldwide liability from the relevant articles.
In practice this means that an heir resident in Germany may claim the Balearic benefits where the regional rules apply under those connecting factors, as is typically the case for property situated in the islands. The return, however, is filed with the State tax administration rather than with the Balearic tax agency, which changes the procedure and the administrative timescales even though it does not change the outcome.
What the relief does not solve
Three matters are regularly conflated. The relief operates on inheritance and gift tax alone, not on the municipal tax on the increase in urban land value, which remains payable to the town hall where the property is located. Nor does it reach the donor's personal income tax: on a gift of real estate the donor must declare the capital gain arising, since the exclusion that applies to transfers on death has no equivalent for lifetime gifts.
One warning is specific to international clients. The assimilation of succession agreements refers expressly to those governed by Ley 8/2022, the granting of which presupposes that Balearic civil law applies to the disposing party. Whether the benefit extends to equivalent foreign institutions, such as the German Erbvertrag, is not expressly settled in the regional rules and calls for case-by-case analysis, both of the succession law applicable and of how the instrument is characterised for tax purposes.
Practical implications and conclusion
The return on death must be filed within six months of the date of death, extendable by a further six if requested within the first five. For gifts the period is considerably shorter, thirty working days from execution of the deed. Late filing is no minor lapse when the tax due is nil, because what it puts at risk is precisely the reason it is nil.
Three points should be settled before signing: the value to be stated in the deed and how it compares with the reference value, the degree of kinship of each recipient, and which regional rules apply where non-residents are involved. These are the three places where the relief is lost, and none of them is easily corrected once the deed has been executed.
Lex·on plans and handles cross-border successions and gifts from Palma de Mallorca and Manacor. If a family transfer of assets in the islands is in prospect, the time to review it is before signature rather than after.
Source: Decreto ley 4/2023, of 18 July; Ley 11/2023; and Ley 6/2025, the Balearic regional budget act, with effect from 25 July 2025.
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This article is for information purposes only and reflects the administrative position in force on the date of publication. It does not constitute legal or tax advice and does not replace an individual analysis of each case.