Tax changes benefit foreigners buying property in Mallorca

New ‘24 tax cuts herald pivotal change for investors

Property lawyers, Lamas Lawyers

The Parliament of the Balearic Islands has introduced significant tax cuts, to benefit foreigners planning to buy property in Mallorca. Among them, the 100% tax exemption for inheritance tax between ascendants, descendants, and spouses stands out, as well as the increase in the threshold for wealth tax from 700,000 euro to 3,000,000 euro. Illustratively, an investor with a property valued at 3,500,000 euro transitions from being taxed on 2,800,000 euro (3,500,000 euro – 700,000 euro deduction) to being taxed on a base of 500,000 euro (3,500,000 euro – 3,000,000 euro). For instance, a foreign investor taxed on a 2,800,000 euro base would incur approximately 38,247.54 euro annually, whereas on a 500,000 euro base, the tax drastically reduces to about 2,273.76 euro – a substantial difference.

Removal of Inheritance Tax between husband & wife / parents & children

Regarding inheritance tax, the 100% tax exemption between ascendants, descendants, and spouses is consolidated; 50% between siblings and between uncles and nephews/nieces when there is no direct descent, and 25% when there are direct descendants.

Increase in Wealth Tax allowance from 700k euro to 3 million euro

The Parliament of the Balearic Islands recently approved a significant amendment to the 2024 Budget, ushering in a pivotal change in the region’s wealth tax regulations. The amendment notably elevates the minimum exemption threshold from 700,000 euro to 3,000,000, euro directly impacting investors within the 0 to 3,000,000 euro asset bracket who are now exempt from this tax burden.

How does the change affect you?

This revision presents favourable outcomes for both existing taxpayers within the affected range and those surpassing the 3,000,000 euro mark. Formerly taxed individuals now enjoy complete exemption, while the latter benefit from a reduced annual tax liability.

Previously, investors faced wealth tax concerns starting from 700,000 euro in investments, but with the new threshold, such worries cease until their total investment reaches 3,000,000 euro.

Going forward

It’s crucial to understand that wealth tax is an annual obligation payable by December 31st each year, based on an individual’s wealth on that date. Calculation involves assessing assets and deducting relevant items such as private loans and mortgages. This amendment reflects a strategic move to incentivise property investment and wealth retention in the region.

Text by Lamas Lawyers

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