Gift and inheritance of real estate in Mallorca

Gifts and inheritances of real estate are subject to special taxation, which we must take into account to ensure the best possible management.

In this way, we do not have to face too high costs and we can benefit from the advantages. If you want to know how to proceed, this post will be of interest to you.

Inheritance and gift tax, costs and tax benefits

Inheritance and gift tax is levied when an inheritance or gift is received. The specifics vary from municipality to municipality because, after all, they are the ones who administer it. This means that the amounts to be paid vary and the costs of the procedure are not the same everywhere. Nevertheless, it is possible to take advantage of various tax benefits under certain conditions.

When calculating the tax, a tax base is determined by adding up the actual value of the real estate. Then any debts and deductible expenses are offset. After that, various deductions have to be taken into account. In this way, the final tax base is determined.

It should also be noted that both reductions or deductions by the state and the autonomous regions are possible. Therefore, the calculation of the tax is relatively difficult due to the different variables that come into play.

What amount is exempt from inheritance tax?

In the Balearic Islands, exemptions and deductions depend on the degree of relationship with the deceased. The amount also varies in case of disability of the heir and depending on the circumstances of the inherited property. In the first case, a special reduction applies to descendants and adopted children under the age of 21. This amounts to 25,000 euros plus 6,250 euros for each year under 21, but may not exceed 50,000 euros.

For children under 21 years of age, a reduction of 99 % of the full tax liability also applies. The amount of the reduction for disability depends on the situation. For a sensory or physical disability of 33 % or more, but less than 65 %, the amount is reduced by EUR 48 000. In the case of a degree of disability of more than 65 % or 33 % mental disability, the amount is EUR 300,000.

There is a further reduction for the acquisition of a principal residence, which is reduced by 100 %. There is also a cap of 180,000 euros for each heir, as follows:

• Spouse.
• Descendants, e.g. children or grandchildren.
• Ancestors.
• Relatives over 65 years of age who lived with the deceased for two years before death.

On the other hand, there is a reduction for receiving the life insurance of the deceased. The reduction is 100 % of the amount received, but not more than 12 000 EUR. It can be applied only if the beneficiary of the insurance is the spouse, a descendant or an ancestor.

What are the costs and what are the tax benefits?

The cost of inheritances and gifts changes depending on the applicable tax rate. This in turn is related to the net basis of the property received. For example, if the property has a net value of 8,000 euros, the rate is 8.5 %. The maximum amount is 800,000 euros and above, which is 34 %.

When paying the tax, the deadlines must be observed. The obligation arises on the day of death or when the declaration of death becomes final. From this date, you have six months to pay the tax in the right place (at the central services, delegations or collection offices of the Balearic Islands Tax Authority) with the appropriate documentation.

Procedure for the sale of inherited real estate

If you want to sell your inherited property, there are a number of steps to follow. These are as follows:

1. Acceptance of the inheritance. If there is a will, you must prepare a list of debts and assets. You must also sign the deed or the division book. If there is no will, the heirs are determined before a notary.
2. Compilation of documents. To accept the inheritance and sell the house, you need the death certificate, the will and a copy of the will.
3. Payment of taxes and registration in the land register. In this step, you pay the gift tax, inheritance tax and municipal capital gains tax. After that, the property must be registered in your name.
4. Sale. Once you have completed the above steps, you can proceed with the sale as usual.

Administration of gifts and inheritance of real estate must be carried out expeditiously. In this way, you will not be delayed, you can pay taxes on time and sell the property without major complications.