Balearic Island government slashes inheritance tax on property

INHERITANCE tax on homes in the Balearic Islands has been slashed by between 25% and 75%, a move which is likely to encourage buyers who know they will not leave their loved ones with a huge bill to pay when they pass away.

Properties with a catastral, or basic land value for home tax calculation purposes, of €100,00 or less already get a 95% discount on inheritance tax.

Regional government deputy president Julio Martínez says that until now, if the catastral value - which can never be more than 50% of the market value - exceeded €100,000 'by just one euro', the person who inherited the property would end up paying 100% of the inheritance tax rather than only 5%.

Martínez considers this unfair, and has introduced a sliding scale to soften the blow.

Now, homes with a catastral value of between €100,001 and €125,000 will attract a reduction of 75% on inheritance tax payable by those to whom they are left, and those between €125,001 and €150,000 will only pay 50%.

A discount of a quarter of the inheritance tax will now apply to properties with a basic land value of between €150,001 and €200,000, and any with a catastral figure of €200,001 or more will pay the full amount.

Effectively, this means that inherited properties which attract the full rate of tax will not be worth less than €400,000 on the open market.

Typical holiday homes, first- or second-time buyer properties or smaller detached or terraced houses bought by expat retirees who have 'downsized' are mostly likely to qualify for sizeable discounts.

Inheritance tax reductions are also likely to cover large apartments and small to medium-sized villas on sought-after residential complexes with full modern facilities.