Donations & Inheritance of real estate in Mallorca

Donations and inheritances of properties are subject to specific taxation, so we must be aware of it in order to carry out the best possible management. In this way, we will not have to assume too high a cost and we will be able to enjoy these assets. If you want to know how to act, this post is of interest to you.

Inheritance and gift tax, costs and tax advantages

Inheritance and gift tax is applied when you receive an inheritance or gift. Its characteristics vary from one autonomous community to another, as they are the ones who manage it. This means that the amounts to be paid vary, which means that the cost of the process is not the same throughout the country. Despite this, it is possible to benefit from various tax advantages depending on certain assumptions.

When calculating the tax, a taxable base is established, which is obtained by adding the actual value of the real estate. Then any debts and deductible expenses that may exist are subtracted. After this, there are different reductions to be applied. Thus, the final taxable base is determined.

We also have to take into account that both state and autonomous community bonuses or deductions are applied. Therefore, the calculation of the tax is relatively difficult to carry out due to the different variables that come into play.

What amount is exempt from inheritance tax?

In the Balearic Islands, exemptions and deductions change according to the degree of kinship with the deceased. Also if the heir has a handicap and depending on the characteristics of the inherited property. In the first case, descendants and adopted children under 21 have a specific reduction. This is 25,000 euros plus 6,250 euros for each year under 21, although it cannot exceed 50,000 euros.

In addition, in the case of children under 21, a 99% rebate is applied to the full tax liability. As for the reduction for disability, the amounts vary according to the situation. A sensory or physical disability of 33 % or more but less than 65 % is reduced by EUR 48 000. If the degree of disability exceeds 65 % or is 33 % mental, the amount is 300,000 euros.

Another reduction is available for the purchase of a main residence, which is reduced by 100 %. There is also a limit of 180,000 euros for each heir, as follows:

• Spouse.
• Descendants, such as children or grandchildren.
• Ascendants.
• Collateral relatives over 65. In this case, they must have lived with the deceased for two years before the death.

On the other hand, there is a reduction for the receipt of the deceased's life insurance. The reduction is 100% of the amount received, but with a limit of EUR 12 000. It can only be applied if the beneficiary of the insurance is the spouse, a descendant or an ascendant.

What are the costs related  and the tax advantages?

The costs of both inheritance and gift change depending on the applicable rate. This, in turn, is related to the net base of the property being received. For example, if the property has a net base of 8,000 euros, the rate is set at 8.5 %. The maximum is 800,000 euros and upwards, which is 34 %.

When paying the tax, the deadlines must be borne in mind. The obligation arises on the day of death or when the declaration of death becomes final. From that moment on, there are six months to pay the tax with the corresponding documentation and in the appropriate place (the Central Services, the Delegations or the collection offices of the Balearic Tax Agency).

Steps to sell inherited property

There are a series of steps to follow if you wish to sell your inherited property. These are as follows:

1. Accept the inheritance. If there is a will, you will have to make an inventory of debts and assets. You must also sign the deed or partitional notebook. If there is no will, the heirs will be determined before a notary.

2. Compilation of documents. To accept the inheritance and sell the house, you need the death certificate, the last will and testament and a copy of the will.

3. Payment of taxes and registration in the Land Registry. In this step you pay the gift and inheritance tax as well as the municipal capital gains tax. After this, the property must be registered in your name.

4. Sale. Once you have completed the above steps, you can carry out the sale following the usual process.

The management of donations and inheritance of real estate must be carried out diligently. In this way, you will not incur any delays, you will be able to pay the taxes in good time and you will be able to sell the property without major complications.