Mallorca real estate - gift or inheritance? The right decision for your estate
The topic is all too often put on the back burner. But at some point you have to deal with the regulation of your personal estate. This is especially true for property owners. This is the best way to settle the estate of your Mallorca property.
The fundamental question facing property owners is the form of transfer: both a gift during lifetime and a regular inheritance are possible. It is worth taking a look at Spanish gift and inheritance tax law. This varies from region to region and depends on the autonomous community in which the property is located. Non-residents can often choose between regional and national legislation.
Inheritance tax and gift tax are regulated differently in Spain. The amount of inheritance tax is based on the market value of the property at the time of death. Any increase in value is irrelevant in Spain, unlike in Germany.
Consider the increase in value when making a gift
The situation is different in the case of a gift. Here, income tax can also be levied on so-called "hidden reserves". This is the aforementioned increase in value of a property since purchase. Important to know: The income tax can be significantly higher than the gift tax, which is also due. In addition, income tax is paid by the donor, while gift tax is paid by the donee.
On Mallorca and the neighboring islands, a gift tax (between close relatives) of currently seven percent applies, while income tax is 19 percent. So if you once bought a property for 250,000 euros that is now worth 500,000 euros, you will pay seven percent gift tax on the current total value as the donee and 19 percent on the increase in value of 250,000 euros as the donor.
No tax on capital gains on inheritance
In the case of inheritance, however, there is no tax on the increase in value. Only the heir pays the tax authorities, namely the inheritance tax on the current total value of the property. This is currently one percent in the Balearic Islands, but can increase depending on the family relationship. In addition, the respective regional regulations and tax rates apply.
Don't hope for free taxes
Spain is having a hard time with exemptions. Depending on the degree of kinship, they are 25,000 or 50,000 euros for inheritance tax. There are no exemptions for gift tax, only allowances. The requirements should be checked by a lawyer.
Case of succession pact
In Mallorca, the so-called succession pact is interesting. This allows assets to be transferred during one's lifetime with a comparatively low tax burden. So far, the regulation applies to Spaniards without any problems. As a resident, you should rely on a competent lawyer and the willingness of the authorities to make a decision.
