Two years after the fiscal reform launched by the Balearic Government, a total of 20,646 families have benefited from the abolition of inheritance tax for close relatives, saving citizens €835 million through tax cuts and deductions.

The reform, approved on July 18, 2023, eliminated the inheritance tax for Groups I and II—namely, between parents and children, grandparents and grandchildren, and spouses. According to official figures, 94% of the declared inheritances were under €1 million, with the measure resulting in a total tax saving of €758 million.

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Over 20,000 Families in the Balearic Islands Benefit from Inheritance Tax Elimination

The reform has led to a significant increase in inter vivos gifts and inheritance agreements, legal instruments typical of the Balearic civil system.

For Group III (siblings, uncles/aunts, and nephews/nieces), who benefit from 25% to 50% tax reductions depending on whether they have descendants, 2,346 taxpayers have saved an additional €50 million.

Another major aspect of the fiscal reform was the elimination of the Property Transfer Tax for the purchase of a first home. As a result, 1,452 young people under 30 and people with disabilities have saved €21 million in total, averaging €14,462 per person.

Additionally, 2,402 young people under 36 and families with multiple children, single parents, or dependents with disabilities have benefited from a 50% tax reduction, saving €24 million in total, with an average savings of €10,000.

“We are not only satisfied but proud that in the first two years of this legislature, more than 26,000 taxpayers have benefited from the two tax cuts we approved within the first ten days of government,” said Antoni Costa, Vice President and Minister of Economy, Finance and Innovation. “This was our idea of change: stop taxing a lifetime’s effort and support families struggling to access housing.”

Broader Tax Reform Measures

The initial measures were followed by additional reforms, including new and improved regional tax deductions. These include:

• A deduction for childbirth, with the option for advance payments (a first in Spain),
• A deduction for adoption,
• Enhanced deductions for rent payments, school textbooks, work-life balance costs, rising mortgage interest rates, and expenses for children studying off-island.

During the latest income tax campaign, 101,839 taxpayers benefited from some type of regional deduction—a 58.1% increase compared to the previous year, leading to a total savings of €32.33 million, nearly doubling the previous year’s amount.

The government later introduced 5 new deductions, improved 4 existing ones, and lowered the regional personal income tax bracket, with special focus on incomes below €30,000.

Financial Impact

The total financial impact of the reform over the past two years includes:

• €835 million in tax relief (inheritance tax, property transfer tax, and income tax deductions),
• €615 million in increased non-financial public spending,
• €500 million reduction in public debt, with projections showing the debt-to-GDP ratio at 17.7% by the end of 2025, the lowest since 2010.

“We’ve proven that economic balance is more than possible,” concluded Costa.