Inheritance Tax Deductions
In the Balearic Islands
This presentation has been updated and is valid for 2016.*
*myAdvocate Europe Ltd does not accept responsibility for losse...
In 2001 the Spanish government devolved the power to set
inheritance tax rates and deductions o the regional
parliaments.
...
Most regions enacted tax laws that applied generous
deductions only to those beneficiaries who were resident in
the region...
Recently, on September 3rd 2014, the European Court of
Justice ruled that such laws were discriminatory and contrary
to Eu...
Accordingly, the Spanish government has enacted new
legislation (Ley 26/2014) which makes any deductions that
may be appli...
The main impact of the new legislation is as follows:
1) If the deceased was a non-resident, living in another
European co...
2) If none of the assets to be inherited are located in Spain,
then the resident beneficiaries should apply the legislatio...
3) If the deceased was resident in one of the Spanish regions
and the beneficiaries were non-resident, and living in anoth...
The regional level deductions available in the Balearic
Islands were enacted by the parliament in Palma and in their
curre...
All deductions, discounts and tariffs that apply to those who
are married will be applied to those who, although unmarried...
Personal Deduction Due to Kinship with
Deceased
Personal deductions are applied according to group classification:
Group I...
The following are the personal exemptions available in the
Balearic Islands:
Group I Deduction of €25,000 plus €6,250 per ...
If the beneficiary suffers a physical disability :
● An exemption of €48,000 in addition to any personal
deductions if dis...
If the beneficiary suffers a mental disability:
● If the disability is a mental disability > 33% an additional
deduction o...
Deductions in transfer of Family Business
● Tax deduction of 95% of the value of the business
● Must be children or spouse...
Investment of Inheritance in New Business
● Deduction of 50% shall be applied to inheritance of
money that is invested in ...
Inheritance of the Family Home
The spouse, descendants, parents or any elderly relative
(in the latter case, who has lived...
Inheritance of the Family Home
The property may not be sold for a period of 5 years after
the inheritance. The main family...
Tax deductions on income from Life Insurance:
Where the beneficiary is a spouse, descendant or parent then a
deduction may...
Special Rules
Where the same assets are subject to two or more processes of
inheritance within a period of 12 years, in th...
Special Rules
A 99% discount shall apply to any inheritance tax payable by a
child of the deceased, being under 21 years o...
Other Deductions:
As a general rule the following deductions may be made on
any estate:
● Funeral Expenses
● Final Medical...
Other Deductions cntd:
Debts held by the deceased that are evidenced by public
documents e.g. a mortgage
24
Once the final amount of tax payable is determined then it is
necessary to apply the relevant rate.
Tax Rates in The Balea...
Tax Rates in The Balearic Islands
Taxable Sum Tax Payable
On This Sum
Any
Remainder
Up To
Applicable
Rate on
Remainder (%)...
Tax Rates in The Balearic Islands
Taxable Sum Tax Payable
On This Sum
Any
Remainder
Up To
Applicable
Rate on
Remainder
(%)...
These new tax rates replace the virtual exemption to inheritance tax
that these groups had previously benefited from.
Spec...
Existing Wealth
Once the relevant tax rate has been applied the result is
multiplied by a coefficient determined by the ex...
Existing Wealth
The Groups referred to signify the following beneficiaries:
Group I Children, including adopted children, ...
Each year in Spain thousands of expats pay more
tax on inheritance than they should – simply
because they fail to follow s...
To find out where to get expert advice, in English, about how
to reduce your liability for inheritance tax, go to:
Expert ...
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Inheritance tax deductions balearic islands

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What deductions from inheritance tax are possible in the Balearic Islands?

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Inheritance tax deductions balearic islands

  1. 1. Inheritance Tax Deductions In the Balearic Islands
  2. 2. This presentation has been updated and is valid for 2016.* *myAdvocate Europe Ltd does not accept responsibility for losses of any type consequent upon reliance on the information contained in this presentation.Please consult a lawyer before acting. Inheritance Law in the Balearic Islands 2
  3. 3. In 2001 the Spanish government devolved the power to set inheritance tax rates and deductions o the regional parliaments. Inheritance Law in the Balearic Islands 3
  4. 4. Most regions enacted tax laws that applied generous deductions only to those beneficiaries who were resident in the region over the balance of the previous five years. Inheritance Law in the Balearic Islands 4
  5. 5. Recently, on September 3rd 2014, the European Court of Justice ruled that such laws were discriminatory and contrary to European Law. 5 Inheritance Law in the Balearic Islands
  6. 6. Accordingly, the Spanish government has enacted new legislation (Ley 26/2014) which makes any deductions that may be applied to residents also available to non-residents who are EU citizens. 6 Inheritance Law in the Balearic Islands
  7. 7. The main impact of the new legislation is as follows: 1) If the deceased was a non-resident, living in another European country then the beneficiary may apply those deductions and exemptions provided by the regional government in which the majority of the inherited assets are located. 7 Inheritance Law in the Balearic Islands
  8. 8. 2) If none of the assets to be inherited are located in Spain, then the resident beneficiaries should apply the legislation enacted by the regional government where they are normally resident. 8 Inheritance Law in the Balearic Islands
  9. 9. 3) If the deceased was resident in one of the Spanish regions and the beneficiaries were non-resident, and living in another European Union country, then they may apply those deductions and exemptions available to residents of the region in which the deceased was resident. 9 Inheritance Law in the Balearic Islands
  10. 10. The regional level deductions available in the Balearic Islands were enacted by the parliament in Palma and in their current form are specified in Law 22/2006. Inheritance Tax Laws in the Balearic Islands 10
  11. 11. All deductions, discounts and tariffs that apply to those who are married will be applied to those who, although unmarried, are registered as ‘established couples’ as per Ley 18/2001. Inheritance Tax Laws in the Balearic Islands 11
  12. 12. Personal Deduction Due to Kinship with Deceased Personal deductions are applied according to group classification: Group I Children, including adopted children, under the age of 21 Group II All other descendants, spouses and parents Group III Close relatives such as brothers and sisters, grandparents, aunts and uncles Group IV More distant relatives 12
  13. 13. The following are the personal exemptions available in the Balearic Islands: Group I Deduction of €25,000 plus €6,250 per year under the age of 21 up to a maximum of €50,000 Group II Deduction of €25,000 Group III Deduction of €8,000 Group IV Deduction of €1,000 13
  14. 14. If the beneficiary suffers a physical disability : ● An exemption of €48,000 in addition to any personal deductions if disability of a degree > 33% and < 66% ● If the disability is > 66% then the additional discount increased to €300,000 14
  15. 15. If the beneficiary suffers a mental disability: ● If the disability is a mental disability > 33% an additional deduction of €300,000 may be applied 15
  16. 16. Deductions in transfer of Family Business ● Tax deduction of 95% of the value of the business ● Must be children or spouse to benefit. ● If no child or spouse, any relative 'to third degree of consanguinity' may benefit from exemption ● The business may not be sold within a period of 5 years 16
  17. 17. Investment of Inheritance in New Business ● Deduction of 50% shall be applied to inheritance of money that is invested in a new business in the Balearic Islands 17
  18. 18. Inheritance of the Family Home The spouse, descendants, parents or any elderly relative (in the latter case, who has lived with the deceased for two years prior to date of death) may deduct 100% of the value of the main family home - up to a value of €180,000 each - as beneficiaries 18
  19. 19. Inheritance of the Family Home The property may not be sold for a period of 5 years after the inheritance. The main family home is as defined for the purposes of legislation dealing with income tax. 19
  20. 20. Tax deductions on income from Life Insurance: Where the beneficiary is a spouse, descendant or parent then a deduction may be made of 100% up to €12,000 of any income derived from a life insurance policy held by the deceased. There is no limit to this exemption if death was caused by an act of terrorism. 20
  21. 21. Special Rules Where the same assets are subject to two or more processes of inheritance within a period of 12 years, in the second and any subsequent inheritance processes, the taxable amount shall be reduced by any amount of tax paid in previous inheritance processes. 21
  22. 22. Special Rules A 99% discount shall apply to any inheritance tax payable by a child of the deceased, being under 21 years of age on the date of death. 22
  23. 23. Other Deductions: As a general rule the following deductions may be made on any estate: ● Funeral Expenses ● Final Medical Expenses of the Deceased 23
  24. 24. Other Deductions cntd: Debts held by the deceased that are evidenced by public documents e.g. a mortgage 24
  25. 25. Once the final amount of tax payable is determined then it is necessary to apply the relevant rate. Tax Rates in The Balearic Islands 25
  26. 26. Tax Rates in The Balearic Islands Taxable Sum Tax Payable On This Sum Any Remainder Up To Applicable Rate on Remainder (%) 0 8000 7,65 8000 612 8000 8,5 16000 1292 8000 9,35 24000 2040 8000 10,2 32000 2856 8000 11,05 40000 3740 8000 11,9 48000 4692 8000 12,75 56000 5712 8000 13,6 26
  27. 27. Tax Rates in The Balearic Islands Taxable Sum Tax Payable On This Sum Any Remainder Up To Applicable Rate on Remainder (%) 64000 6800 8000 14,45 72000 7956 8000 15,3 80000 9180 40000 16,15 120000 15640 40000 18,7 160000 23120 80000 21,25 240000 40120 160000 25,5 400000 80920 400000 29,75 800000 199920 And above 34 27
  28. 28. These new tax rates replace the virtual exemption to inheritance tax that these groups had previously benefited from. Special Tax Rates for Groups I & II 28 Taxable Sum Tax Payable On This Sum Any Remainder Up To Applicable Rate on Remainder (%) 0 0 700,000 1 700,000 7000 300,000 8 1,000,000 31,000 1,000,000 11 2,000,000 141,000 1,000,000 15 3,000,000 291,000 and above 20
  29. 29. Existing Wealth Once the relevant tax rate has been applied the result is multiplied by a coefficient determined by the existing wealth of the beneficiary as well as the group to which they belong: Group Existing Wealth (€) I & II III IV 0 to 400,000 1 1.6575 1.7 400,000 to 2,000,000 1.05 1.7 1.785 2,000,000 to 4,000,000 1.1 1.785 1.87 More than 4,000,000 1.2 1.955 2.04 29
  30. 30. Existing Wealth The Groups referred to signify the following beneficiaries: Group I Children, including adopted children, under the age of 21 Group II All other descendants, spouses and parents Group III Close relatives such as brothers and sisters, grandparents, aunts and uncles Group IV More distant relatives 30
  31. 31. Each year in Spain thousands of expats pay more tax on inheritance than they should – simply because they fail to follow some simple rules. 31
  32. 32. To find out where to get expert advice, in English, about how to reduce your liability for inheritance tax, go to: Expert Probate Services in the Balearic Islands Expert Probate Services in the Balearics 32

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