With effect from 01-01-2024 several tax changes have been introduced in the Balearic Islands.
We highlight the main ones:
Wealth Tax
The amount of the minimum exemption (free threshold) to people who habitually reside in the Balearic Islands is increased from 700,000 euros to 3,000,000 euros.
Personal Income Tax
1.- Reduction of the regional tax rates, which are as follows:
Taxable income From (Euro) | Amount of tax | Rest of taxable income up to (Euro) | Tax rate (%) |
0 | 0 | 10,000 | 9.00 |
10,000 | 900 | 8,000 | 11.25 |
18,000 | 1,800 | 12,000 | 14.25 |
30,000 | 3,510 | 18,000 | 17.50 |
48,000 | 6,660 | 22,000 | 19.00 |
70,000 | 10,840 | 20,000 | 21.75 |
90,000 | 15,190 | 30,000 | 22.75 |
120,000 | 22,015 | 55,000 | 23.75 |
175,000 | 35,077.50 | Onwards | 24.75 |
2.- Changes or new deductions in the following areas:
a) Leases of property intended for housing in the Balearic Islands.
New 30% deduction of the amounts obtained from the rental derived from properties placed on the long-term rental market, limited to a maximum of 3,600 euros per year.
The following requirements must be met in order for the deduction to be applied:
The property has to be located in the Balearic Islands and destined for habitual residence.
The duration of the contract has to be equal to or greater than 5 years.
The deposit has to be transferred to the Balearic Housing Institute.
The tenant has to declare the income derived from the rental as income from real estate capital in his/her Personal Income Tax.
b) Birth.
The application of this deduction may not result in a negative tax liability, without prejudice to the provisions regarding the early payment of the deduction or the payment of the amount that could not have been deducted due to insufficient tax base, and its consideration as a public birth benefit for the purposes of tax exemption.
When there is two people entitled to the deduction and they do not opt for joint taxation, the amount shall be apportioned equally. If the number of children of each person gives rise to the application of a different amount, each of them shall apply half of the deduction corresponding to him/her according to the number of pre-existing children.
c) Adoption.
The application of this deduction may not result in a negative tax liability.
In the event of insufficient tax liability that makes it impossible to apply the deduction in its full amount, the taxpayer may request payment of the amount that cannot not be deducted, which shall be considered as a public adoption benefit for the purposes of the personal income tax exemption.
The deduction does not apply in the case of the adoption of the spouse's or partner's child.
The deduction is also incompatible with public aid and benefits granted or awarded by this Autonomous Community for birth reasons.
d) Expenses relating to ascendants over 65 years old.
40% deduction of the annual amounts paid for the expenses of the following services:
Stays in day centres of ascendants over 65 years old.
Custodial service, canteen service and activities for ascendants over 65 years old in day care centres.
Employing a person to take care of the ascendant over 65 years old. The employee must be registered with the Social Security.
This deduction is limited to an amount of 3,600 euros per year.
e) Self-employment promotion.
Deduction of 1,000 euros for people who register for the first time in the Census of Entrepreneurs and Professionals. The deduction will be applied in the tax period in which the registration takes place and the following requirements must be met in order to apply it:
The activity must be carried out mainly in the territory of the Balearic Islands.
The taxpayer must remain in the census for at least one year from the date of registration.
f) Occupation of places declared difficult to cover in the Balearic Islands.
Taxpayers who have their habitual and effective residence in the Balearic Islands, may apply a deduction of 30% of the regional tax liability.
Transfer Tax and Stamp Duty
The main changes to these types of tax are as follows:
1.- Transfer tax:
a) Reduced rate of 4%
Applies to the transfer of real estate when a percentage equal to or greater than 50% of the full ownership or the right of use of the property is acquired. In addition, the acquirer must not be the owner or co-owner of any other right of full ownership or right of use in respect of any other property in a percentage equal to or greater than 50%.
b) Reduced rate of 2%
Applies to the transfer of property to young people under 36 years old when the property is their first home, and the acquisition is of full ownership or the right to use the property for a percentage equal to or greater than 50%.
c) 100% rebate
On the purchase of the first main residence by young people under 30 years old and people with a disability equal to or greater than 33%. A percentage equal to or greater than 50% of the full ownership or the right of use of the home must be acquired.
It is not possible to be the owner or co-owner in a percentage equal to or greater than 50% of any other right of full ownership or right of use with respect to any other property.
In all cases, the real or declared value - if this is higher - of the property may not exceed 270,151.20 euros.
The definition and requirements of the concept of habitual residence are those established by the regulations governing Personal Income Tax.
2.- Stamp Duty:
a) Reduced rate of 1.2%
It will be applicable to first copies of deeds, when their purpose is the transfer or the constitution of rights in relation to real estate, that are to constitute the purchaser's first habitual residence, when the real or declared value - if this is higher - is equal to or less than 270,151.20 euros.
The purchaser of the property must not be the owner or co-owner of any other right of full ownership or right of use in respect of any other property in a percentage equal to or greater than 50%. Failure to comply with the requirements implies the supervening loss of the right to the application of this reduced tax rate.
b) Increased rate of 2%.
It will be applicable to first copies of deeds when their purpose is the transfer or the constitution of rights in relation to real estate, when the real or declared value - if this is higher - is equal to or higher than 1,000,000 euros.
If you have any questions or would like further information on this article, please contact us.
Balagué-Sala Lawyers
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