The Balearic Islands reformed inheritance and gift tax in 2023, introducing effective 99% treatment for Group I (descendants under 21) and Group II (spouse, adult children, parents, grandparents) beneficiaries. The reform transformed the estate position for Mallorca, Menorca, Ibiza and Formentera expat families. Non-resident heirs of Balearic property elect regional rules on Modelo 650. Compromís Foral applies in Ibiza and Formentera (Pitiusas).
The Illes Balears — Mallorca, Menorca, Ibiza and Formentera — hold one of the highest per-capita concentrations of international property ownership in Europe. German, British, Swiss, Nordic and Benelux expats and second-home owners have shaped the islands' property markets for half a century. Mallorca alone runs from the premium southwest corner (Puerto Andratx, Santa Ponsa, Sol de Mallorca, Bendinat, Portals Nous), through Palma itself, the northeast (Pollensa, Alcúdia, Cala San Vicente) and the quieter interior villages. Menorca's north and south coasts, Ibiza's coastline from Portinatx to Santa Eulalia and Playa d'en Bossa, and Formentera's small luxury market all present cross-border inheritance matters for our caseload.
The 2023 reform (enacted by the Balearic regional parliament in mid-2023 and effective to deaths and gifts from that date) introduced a 100% reduction / 99% effective treatment for Group I and Group II beneficiaries. The mechanism differs slightly from Madrid or Andalusia — the Balearic reform operates through base reductions rather than a post-quota bonificación — but the practical outcome is equivalent: Spanish IHT for direct-family beneficiaries is reduced to near zero.
This page covers the Balearic IHT framework, the 2023 reform's mechanics and practical reach, the specific civil-law position of Ibiza and Formentera under the Compromís de Caspe / Compilación de Derecho Civil Balear, and the mechanics of filing at the Illes Balears regional tax office (ATIB — Agència Tributària de les Illes Balears). If your matter involves Balearic property, open a file with us.
Balearic rules run through base reductions rather than a post-quota credit. Six elements drive every calculation.
Ley 12/2023 and implementing regulation effective mid-2023. Base reduction achieves effective 99% treatment on Group II estates. Equivalent practical outcome to a post-quota bonificación.
Core reductionSiblings, nieces and nephews receive a modest regional reduction post-2023. Not full Group II equivalence. Effective rates materially lower than pre-reform but above Group II.
Partial creditThe same 2023 reform extended the base reduction to lifetime gifts for Group I and II. Lifetime transfer of Balearic property is now materially efficient.
Gift parityNon-resident heirs of Mallorca, Menorca, Ibiza or Formentera property elect Balearic rules on Modelo 650 under the 2014 ECJ principle.
Cross-borderBalearic civil law (with Pitiusas variants for Ibiza and Formentera) applies to successions where Balearic regional civil law is selected. Differs from Civil Code in forced heirship shares.
Regional civil codeFiled with Agència Tributària de les Illes Balears at Palma, Maó (Menorca), Ibiza or Formentera offices. Six-month deadline from death.
Regional filingThe Balearic 2023 reform was implemented by Ley 12/2023 (and associated fiscal regulations) by the then-incoming regional government and has been maintained through 2024 and 2025. The mechanism is an enhanced base reduction that, combined with the existing framework of allowances and tariff, produces an effective tax of near zero for Group I and II. The reform was targeted at retaining wealthy residents and attracting foreign investment — Mallorca and Ibiza had seen capital flight to Madrid and Andalusia from clients specifically citing IHT regimes. The reform closed that gap.
The practical effect on our Balearic client base: a spouse or adult child inheriting a €2m Puerto Andratx villa from a Mallorca-resident parent now faces Spanish IHT of a few hundred euros, versus tens to hundreds of thousands pre-reform. Lifetime transfer planning has correspondingly opened up — the same treatment applies to gifts.
The Balearic Islands operate their own civil law for successions alongside the tax rules. The Compilación de Derecho Civil Balear provides forced heirship rules that differ between Mallorca, Menorca (which follows Mallorcan rules broadly), and the Pitiusas (Ibiza and Formentera, which have distinct historical rules deriving from medieval Catalan customary law). Mallorca and Menorca apply a legítima of one-third of the estate to descendants; the Pitiusas allow full testamentary freedom through the figure of the espolitz and traditional Ibizan inheritance arrangements.
This matters because Balearic civil law, where chosen under Brussels IV or where the deceased had Balearic vecindad civil, produces different forced-heirship outcomes than Civil Code Spain. For British expat deceased electing UK law on their Spanish will under Brussels IV, the civil-law question is moot — UK law applies. But for Spanish or mixed-nationality families, the Balearic civil code is an important part of the analysis.
Ibiza and Formentera run their own variant within the Compilación, sometimes called Derecho Pitiuso. Testamentary freedom is broader, and traditional inheritance instruments such as the acogimiento a los cuatro cabales (a matrimonial property/inheritance structure) and the espolitz (a pre-marital agreement affecting inheritance) can feature. These are rare in modern practice but occasionally surface in old-family Ibizan estates. For expat matters the mainstream tax reform applies identically across all four islands.
We confirm the deceased's habitual residence in Balearic Islands (or the property's location for non-resident matters) and classify each beneficiary by group for allowance purposes.
Valor de referencia checked for Spanish property. We screen for the habitual-residence reduction, family-business reduction and region-specific allowances.
Filed with the Balearic Islands regional tax office (or AEAT with regional election for non-residents). UK IHT credit claimed where applicable.
Tax receipts delivered to the notary for inclusion in the escritura. Land Registry transfer lodged. Closing pack to the family in English.
The 2014 ECJ principle applies in the Balearic Islands. Non-resident heirs of Balearic-situated property (villa in Mallorca, apartment in Ibiza, house in Menorca, flat in Formentera) elect Balearic rules on Modelo 650 to capture the 2023 reduction. Silent filings default to state rules and lose the benefit. Explicit election on the form is not optional — it is the mechanism.
Balearic rules retain the habitual-residence reduction (95% for Group II, capped) and family-business reduction (95% / 99% depending on structure), both at the base-reduction stage. Post the 2023 reform, with the base reduction already producing near-zero tax on Group II estates, these targeted reductions have become marginal — they still calibrate the base figure but rarely change the ultimate tax bill.
UK-domiciled deceased with Balearic property: UK IHT applies to the worldwide estate. Spanish IHT after 2023 reform is near zero. Article 23 credit applies but has little Spanish tax to credit against. UK IHT dominates the cross-border bill — consistent with other low-effective-rate regions.
Balearic-resident deceased with retained UK assets: Spanish IHT on the worldwide estate at near-zero Balearic rates; UK IHT on UK-situated property (UK real estate typically) separately at full rates. Credit mechanism available but asymmetric.
Valor de referencia figures in Mallorca's premium southwest (Puerto Andratx, Santa Ponsa, Bendinat, Portals Nous) and northeast (Pollensa, Formentor, Alcanada) can be materially lower than real market values, which paradoxically produces a planning opportunity: declared IHT values can be relatively low without triggering re-assessment. Ibiza's premium market (Roca Llisa, Cala Jondal, Es Cubells, Porroig) has a wider gap between cadastral and market values. Menorca's rural properties are often cadastrally undervalued. Formentera's small market has highly variable references.
Post-reform the valuation position matters less for IHT itself (because the tax is near zero regardless) but it drives the plusvalía calculation and the future CGT base on eventual sale. Under-declaring to save municipal plusvalía can cost on sale; over-declaring wastes CGT base. We calibrate both.
Each municipality sets its own plusvalía tariff. Palma, Calvià, Andratx, Pollensa, Alcúdia, Santa Eulalia, Sant Josep, Sant Antoni, Eivissa, Maó, Ciutadella, Formentera — each with different rates. The post-2021 election between objective and real-gain calculation applies. Premium-location properties bought and held for long periods often produce substantial objective plusvalía assessments; real-gain calculation may produce lower liability. We screen both.
The Balearic Islands apply wealth tax at approximately the national framework — no 100% bonificación as in Madrid. The federal solidarity tax on fortunes above €3m applies nationally. A substantial portion of our Mallorca and Ibiza client base engages both taxes given property values involved. Planning the interaction — and the distinction from IHT, which is a separate regime — is part of every substantial Balearic engagement.
The Agència Tributària de les Illes Balears operates offices in Palma (the main office), Maó for Menorca, Ibiza town for the Pitiusas, and services Formentera via the Ibiza office. Modelo 650 is filed at the relevant island office or via the regional e-filing portal with a Spanish digital certificate. Apostilled UK documents and sworn translations are accepted; processing times are typically 6 to 10 weeks, slightly slower than mainland regional offices during summer when island tax offices are under pressure.
Estates including Balearic property plus mainland property require coordinated filings. Balearic rules apply to Balearic-situated assets; the relevant mainland region's rules apply to mainland assets. For a family with a Palma apartment and a Madrid flat, two regional elections may apply across two filings. We coordinate the overall position rather than filing piecemeal.
Post-2023, the Balearic Islands deliver near-zero Spanish IHT for direct-family inheritance. We add value in filing discipline, civil-law navigation and cross-border coordination.
Request a Balearic Islands CalculationParents resident in Balearic Islands with children abroad; non-resident owners of Balearic Islands property; surviving spouses, siblings, grandparents — the applicable rules vary with the family configuration.
€3.5m Puerto Andratx villa, two UK-resident adult children, British-domiciled deceased. Post-reform Spanish IHT under €3,000. UK IHT dominates cross-border position.
€850,000 Palma Old Town apartment, Spanish-resident surviving spouse. 2023 reform applies. Spanish IHT near zero.
€2.2m Santa Eulalia villa, pareja de hecho registered Balearic register before death. Group II treatment. Post-reform Spanish IHT near zero.
€550,000 Ciutadella property, Group III nieces. Partial Group III reduction applies but not full Group II treatment. Effective tax material but improved.
€700,000 Formentera apartment, UK-resident adult child. Regional election captures 2023 reform. Spanish IHT near zero.
€900,000 Pollensa property, surviving unregistered partner in Group IV. No reduction access. Full marginal tax — registration during lifetime would have prevented.
Non-resident heirs default to state rules on silent filings. Regional election on Modelo 650 is the hinge of the 2023 reform benefit.
Older articles, older lawyers and older financial planners still quote pre-reform Balearic figures. Verify rules as at the date of death.
Balearic civil law differs from Civil Code Spain. Without a valid Brussels IV choice, the deceased's habitual-residence law applies. Choose on every Spanish will.
Declared values below valor de referencia trigger re-assessment. Post-reform the tax saving is minimal anyway — not worth the risk.
Island-specific filings should go to the correct island office. Administratively cleaner and tracks any island-specific civil-law features.
ATIB offices run at reduced capacity July-August. Filings within this window can be slower to process. Time the submission accordingly.
Premium villa inheritance. German and British expat families predominantly. Post-reform Spanish IHT near zero; UK IHT dominates for UK-domiciled.
Old Town, Santa Catalina, Portixol, Molinar. Urban inheritance post-reform effectively tax-free at Spanish level for direct family.
Mixed villa and rural-estate caseload. Same regional rules throughout the archipelago.
Premium villa inheritance plus civil-law Pitiusas variants. Testamentary freedom broader; tax regime identical to Mallorca.
Quieter inheritance caseload. Ciutadella, Maó, Es Mercadal, Fornells. Lower-value portfolio but same regional rules.
Pareja de hecho registration in the Balearic regional register during lifetime — single most cost-effective planning step for non-married couples.
Regional allowances applied, group classifications checked, habitual-residence and family-business reductions screened, deadline tracked.