Balearic Islands – The government plans to raise taxes
Instead of creating incentives for investment, individuals with high valued assets are asked to pay in 2016. There will be increases in income tax, inheritance and donations, property and land acquisition. A draft law that should be considered, even if only a project at present time.
In the case of inheritance and gift tax a progressive tax is planned. This varies between 1% and 20%. So far, inheritances were taxed directly related to a maximum of 1%.
With regards to the real estate transfer tax, strictly in terms of resale properties between individuals, the draft law provides a new tax rate: from 1 million of the transaction value 11 % tax is due to be paid. Until now, the maximum tax rate amounted 10% (from € 600,000.00).
Regarding the income tax, paid by tax residents in the Balearic Islands, the top tax rate increased to 47.5% (previously 44%). This represents an increase of 3.5% for an annual income of more than € 70,000.00.
Rising property taxes for tax residents should be made retroactively, that means from 2015. It is expected to reduce the exempt amount to 700,000 € 800,000.00 € and raising the tax rate. So, tax rates could move between 0.28% and 3.45% (currently 0.2% and 2.5%). Important issue: non-residents are not affected by this increase. These are related to the State Tax Regulation, ie 0.2 to 2.5 percent.
PROPERTY TAX
Reduction of the tax free amount from 800.000 to 700.000 euros.
Increase of the tax scale as follows:
| CALCULATION BASE | Total rate | REST CALCULATION BASE UP TO: | TAX % |
| 0,00 € | 0 € | 170.472,04 € | 0,28 |
| 170.472,04 € | 477,32 € | 170.465,00 € | 0,41 |
| 340.937,04 € | 1.176,23 € | 340.932,71 € | 0,69 |
| 681.869,75 € | 3.528,67 € | 654.869,76 € | 1,24 |
| 1.336.739,51 € | 11.649,06 € | 1.390.739,49 € | 1,79 |
| 2.727.479,00 € | 36.543,30 € | 2.727.479 € | 2,35 |
| 5.454.958,00 € | 100.639,06 € | 5.454.957,99 € | 2,90 |
| 10.909.915,99 € | 258.832,84 € | in the following | 3,45 |
TAXES FOR THE PROPERTY TRANSFER AND STAMP DUTY
When the value of the property exceeds 1.000.000 euros, the tax rate will be 11%.
| TOTAL VALUE OF THE PROPERTY | TOTAL RATE | REST VALUE UP TO | TAX % |
| 0 € | 0 € | 400.000 € | 8 |
| 400.000 € | 32.000 € | 200.000 € | 9 |
| 600.000 € | 50.000 € | 400.000 € | 10 |
| 1.000.000 € | 90.000 € | in the following | 11 |
INHERITANCE TAX AND DONATIONS
Special tax rate for people in the groups I and II ( children, parents, couples):
| CALCULATION BASE | TOTAL RATE | REST CALCULATION BASE UP TO | TAX % |
| 0 € | 0 € | 700.000 € | 1 |
| 700.000 € | 7.000 € | 300.000 € | 8 |
| 1.000.000 € | 31.000 € | 1.000.000 € | 11 |
| 2.000.000 € | 141.000 € | 1.000.000 € | 15 |
| 3.000.000 € | 291.000 € | En adelante | 20 |
