“Comunidades Autónomas” have their own inheritance and gift tax regulations as a result of the Spanish State ceding the tax revenue of inheritance and gift tax to the “Comunidades Autónomas”, along with some regulatory autonomy to adapt tax to the particular circumstances of each.

This means that most of them have ruled new (and huge) benefits compared to those established by the Spanish State.

While the tax scheme and regime is the same in all parts of Spain, the “Comunidades Autónomas” took advantage of their new powers to fix higher thresholds, or different rates or direct reductions on the amount to be paid (and sometimes all of these) to benefit close relatives of the deceased or disabled people. There are also benefits that help promote local business, farming, etc. as well as in the acquisition of cultural assets of each Comunidad Autónoma.

However, the regulations change quite frequently so it is necessary to check the regulation in force at the time the tax is due.

In the Baleares the tax rates for gifts are on a scale ranging from 612€ for a gift of 8,000€, 15,640€ for a gift of 120,000€ and 199,920€ for a gift of 800,000€. This is then multiplied by a coefficient corresponding to the existing wealth of the tax payer and relationship to the donor.

The evaluation of the existing wealth of the taxpayer will be according to the rules applying to wealth tax.
When dealing with accumulated donations the value of the goods and rights acquired by a previous donation is excluded.

In the Comunidad Autónoma of the Balearic Islands there are the following reductions:

Reductions for the acquisition of an individual enterprise, a professional business or a share in a company belonging to the donor

For gifts to spouses or descendants of an individual enterprise, a professional business or a share in a company, a reduction of 95% will be applied to the value of the gift to give the taxable amount.

Reductions for the acquisition of an individual enterprise or a professional business or a share in a company where jobs are retained

For gifts made to a spouse or descendants a reduction of 99% can be applied on condition that the donor is 60 or older, or is permanently or severely disabled and the average total workforce is retained. This benefit is incompatible with the above reduction.
The following conditions also apply:

a) The recipient must keep possession of the gift without doing anything to substantially reduce its value for a period of 5 years, complying with the conditions of the reduction and so retaining the right to the exemption throughout this period.
b) At the time of the gift the donor must cease to be active in the business or enterprise and receive no more income from the same, if that is the case (this does not include merely being a director).
c) If the workforce is not maintained or the above conditions are breached, the recipient must make a tax declaration within one month of the breach, paying the tax previously exempt but now owed, plus interest.

Reductions for cash gifts to family members to create new businesses and employment/ to create cultural or scientific businesses or to develop technology/ to create sports businesses

A reduction of 50% will be applied to cash gifts (with a limit of 200,000€) to descendants or between family members up to the third grade (aunts, uncles, nephews and nieces) in order to create a business.
For the creation of cultural, scientific or sports businesses or the development of technology the reduction is increased to 70% (with a limit of 300,000€).
These reductions apply whether for an individual enterprise, a professional business or a corporate entity issuing shares or participations as long as the following conditions apply:

a) The gift is recorded in a public deed stating that the cash gift is to be used exclusively for the purposes of creating the specific new business and that it complies with the conditions stated here.
b) It does not have as its main activity only the possession of assets or property or the leasing of property.
c) At least one full-time worker tax registered in the Baleares must be contracted (not including the tax payer or associates applying the reduction), and it must continue in business for a minimum of 4 years maintaining the workforce and level of investment required for the reduction.
d) The business must be created, and have created employment within 18 months.
e) The annual turnover must not exceed 2,000,000€ during the 4 years of the reduction.
f) The recipient must have assets worth less than 400,000€ on the date of the registration of the gift.
g) If the gift is a shareholding in a corporate entity the gift must represent more than 50% of the capital of the company and must be retained for 4 years. The recipient must have no link with the rest of the shareholders.
h) If the above conditions are breached, the recipient must make a tax declaration within one month of the breach, paying the tax previously exempt but now owed, plus interest.

Reductions for gifts of assets of historical cultural heritage to a spouse or descendant

For gifts of assets registered as of Balearic Islands historical cultural heritage made to a spouse or descendant a reduction of 99% will be applied. Also, for gifts of Spanish historical cultural heritage or historical cultural heritage from other autonomous communities a reduction of 95% will be applied.
The recipient must retain ownership of the assets for a period of five years following the donation unless the assets are donated to a regional public administration or institution.

Reductions for the gift of a house to be a first habitual residence 

For gifts to children or descendants ( family relationship must be proved)  to be their first habitual residence in Spain and who have not previously acquired a residence in the same way, a reduction of 100% will be applied on condition that:

a) Full ownership of the property is acquired.
b) The value of the property must not exceed 270,151.20€

Reductions for contributions to “Patrimonios Protegidos” for disabled people

For contributions to disabled people there is a reduction of 99%; this is incompatible with the previous reduction.

Reductions for cash gifts to buy a house to be a first habitual residence

A reduction of 100% will be applied to monetary gifts from parents to children and descendants  for the purchase of a first habitual residence on condition that:

a) The gift is recorded in a public deed stating it is to be used solely to acquire the first habitual residence of the recipient.
b) The property must be acquired within 6 months.

c) The maximum amount applicable is 270,151.20€

This reduction is incompatible with that of the gift of a house to be the first habitual residence. The limits stated are applicable whether for one donation or successive donations from different ascendants.

Reductions for the donation of immovable property in exchange for a living pension

For grants of property to provide a living pension where there results an excess in value with regard to the pension there is a reduction of 70% on the tax due for siblings, aunts, uncles, nephews, nieces (whether blood relatives or in-laws) and in-law descendants and ascendants or 75% for cousins or unrelated recipients.
a) To apply this reduction the relationship between the donor and the recipient must be one of the above
b) The person granting the pension must be 65 or more or be disabled to degree of 65% or more.
c) The grant must be the first of its kind.
d) The asset granted must have a value of 300,000€ or less and remain in the possession of the recipient for a period of 10 years.
e) If the above conditions are breached, the recipient must make a tax declaration, paying the tax previously exempt but now owed, plus interest.

There are further reductions for descendants, ascendants and spouses.

• The question now is when can these benefits be taken advantage of?
  When the gift is of immovable assets located in Baleares or the gift is of other kinds of assets when the beneficiary is a resident in Baleares.

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