Navigating the ever-changing landscape of real estate can be challenging, especially when it comes to understanding the implications of new tax laws. At Ibiza Hills Homes, we are dedicated to providing our clients with the most up-to-date information, ensuring they are well-equipped to make informed decisions. Our team, well-versed in the property world, is backed by a robust network of professionals from various fields. Whether you need advice from a tax consultant, a legal advisor, or a property management expert, we can connect you with trusted professionals who can provide valuable insights and services.
In light of recent significant tax changes in Ibiza, we believe it’s crucial to explain these developments and their potential impact on residents and property owners on the Island. Here’s what you need to know:
The Changes Explained
In a landmark decision, the new government of Baleares, led by Marga Prohens, has abolished the inheritance and donation tax for direct kinship lines, including parents and children, grandparents and grandchildren, and spouses. This move, which also includes a reduction of up to 50% between siblings and between uncles and nephews, is a significant stride towards financial relief for families in the islands.
Election Promises Fulfilled
This tax reform was a key promise made by the PP of the islands during the election campaign. Now, the measure has come into effect immediately after its publication in the Official Gazette of the islands, pending ratification in the regional Parliament within a month.
The reform eliminates the tax on inheritance and donations between direct kinship lines, affecting both inheritances due to death and those made during life. In the case of inheritances between siblings or between uncles and nephews where the deceased does not have descendants, the reduction will be 50%. If there are descendants, the reduction will be 25%.
Baleares stands out as no other community has gone as far in its reductions in the inheritance and donation tax, a tax whose management is transferred to the autonomous communities, like the wealth tax. This tax was the first to be the subject of a downward fiscal competition among autonomous communities more than a decade ago.
Help for Young, and Disadvantaged
In addition to the inheritance and donation tax reform, the government has also approved the elimination of the property transfer tax on the purchase of a first home up to €270,000 for young people under 30 and people with disabilities. The tax is also reduced by 50% for the purchase of a first home for young people under 35 and for the purchase of a habitual residence for large families, single-parent families, or those who have people with disabilities in their care.
The government of Baleares collected €124 million last year through this tax. However, according to Prohens, this amount will not be passed on to the citizen in other areas because “there is more than enough margin to lower taxes”. The government estimates that the island’s citizens will save €75 million with the reform, around €60 million from the inheritance and donation tax and €15 million from the property transfer tax.
This move by the Balearic government is a significant step towards easing the financial burden on families, particularly in a time of economic uncertainty. It remains to be seen how this will impact the broader economic landscape of the region and whether other communities will follow suit.
Were you already thinking of moving to Ibiza and the tax change has made up your mind? Get in touch with us, we can help you find your ideal home on the Island. With our knowledge and network, we can ensure that you are well-prepared and well-advised for your real estate journey in Ibiza.