Suppression of Inheritance (and Gift) Tax in the Balearic Islands and the Valencian Community

The recently elected presidents of the governments of the Balearic Islands and the Valencian Community announced in their electoral programmes their intention to abolish or substantially reduce Inheritance (and Gift) Tax.

These tax cuts are similar to those already introduced in Andalusia in 2022 and in force in Madrid for almost two decades.

The following is a summary of the main tax cuts already approved or announced by the new governments of both territories:

1. Measures in the Balearic Islands

By Decree-Law 4/2023 of 18 July of the Council of Government of the Balearic Islands, the following has been approved:

• 100% allowance on inheritance tax between parents and children, grandchildren and grandparents and between spouses.

Although there are communities that contemplate generous bonuses, deductions and reductions, this is the first autonomous community that reduces the tax liability in its entirety for the aforementioned groups.

• Up to 50% allowance, depending on certain conditions, of the Inheritance Tax quota between siblings and between uncles, aunts and nephews and nieces.

There are no changes with regard to gift tax.

The Decree-Law has been in force since 18 July 2023 and has yet to be validated by the Balearic Parliament.

In its current wording, the regulation is only applicable to taxpayers with unlimited tax liability, i.e., residents in Spain, which is a direct discrimination against non-residents, clearly contrary to EU law. Without prejudice to a possible rectification in Parliament, non-residents are advised to seek advice before declaring and settling the tax accrued after the entry into force of the rule.

2. Measures in the Valencian Community

In the Valencian Community, no amendment has yet been approved, although the Government has officially announced that it has already initiated the urgent processing of the following amendment:

• A 99% allowance of the Inheritance and Gift Tax quota in transfers in favour of children, spouses, fathers and mothers.

This allowance has been announced to be retroactive from 28 May 2023, the date of the regional elections.

Lozano Schindhelm advises all those who are planning to donate or have received an inheritance in the Balearic Islands or the Valencian Community to take comprehensive advice on the recently approved or announced tax reliefs. Those who have recently settled inheritance and gift tax under the Valencian regulations may even be entitled to a refund.

All this in your language and with high quality standards, backed by more than 15 years of experience in providing tax advice to residents and non-residents.

Autor: Fernando Lozano
Autor: Claudia Cascant
Autor: Andrea Quiles