The tax planning in the Balearic Islands has become a key tool for those who want to efficiently organize the transfer of their assets, especially in light of regulatory changes affecting gifts between family members.

If you are looking for a gestoría in Palma de Mallorca specializing in tax law and asset transfers, this article will help you understand how to take advantage of the current tax benefits.

Why gifts in the Balearic Islands are now a great opportunity

Since July 2025, gifts between family members in the Balearic Islands have become a very effective tool for anticipating inheritances and optimizing taxes. The regional regulations allow many transactions to be nearly tax-free under the Inheritance and Gift Tax (ISD), provided they are properly structured.

To achieve this, it is essential to coordinate taxation (ISD, personal income tax, and municipal capital gains tax), the origin of funds, and civil/succession aspects. Proper planning, guided by a tax advisor in Palma de Mallorca, will prevent future issues and ensure maximum savings.

Key tax considerations of ISD in the Balearic Islands

The main measure is the regional 100% exemption on the ISD tax liability for gifts between immediate family members (Groups I and II: children, parents, adopters, spouses, grandchildren, and grandparents). This exemption applies from July 25, 2025, and in practice eliminates taxation in most situations.

For relatives in Group III, the reduction remains significant: approximately 60% for siblings and nephews/nieces by blood, and around 35% for relatives by affinity. Even if the final tax due is zero due to the exemption, Form 651 must still be filed with the ATIB within 30 working days, always by the beneficiary.

Effective tax planning strategies through gifts

One of the most common techniques is advancing inheritance through lifetime gifts of real estate, money, or shares in a family business. Thanks to the 100% exemption for immediate family members and the special reductions for family businesses or agricultural operations, the transfer can be highly advantageous.

It is also common to replace indefinite family loans with a formal debt forgiveness, which is treated as a gift for tax purposes. Under current legislation, this operation may also benefit from the exemption depending on the degree of kinship.

In some cases, it is advisable to stagger gifts among several children or over different years to better manage the taxable base or pre-existing wealth. Although the focus is now more on civil and succession matters, this planning still helps avoid unexpected issues.

Essential aspects to watch closely

When donating money or financial assets, it is crucial to prove the lawful origin of the funds and document it in the notarial deed. Otherwise, issues may arise under anti-money laundering regulations.

Additionally, the ISD exemption does not eliminate other taxes: municipal capital gains tax may arise when gifting property, and in certain cases the donor may need to pay personal income tax on a capital gain, unless an exemption applies (such as for individuals over 65 transferring their primary residence).

To ensure the exemptions are correctly applied, the law requires the gift to be formalized in a public deed and that all deadlines with the ATIB be strictly met.

Practical advice for families in the Balearic Islands

Before making any decisions, it is advisable to prepare a family asset map, analyzing properties, investments, debts, businesses, and objectives: protecting a specific child, ensuring an equitable distribution, succession planning for a business, etc.

It is also recommended to request a simulation comparing different scenarios: doing nothing, inheriting later, gifting now, or using succession agreements. With the 100% exemption, traditional gifts have become especially competitive compared to inheritance.

Coordination between a notary and a tax advisor in Palma de Mallorca specializing in regional regulations is essential to adapt each case to Balearic civil law (legítimas, succession agreements, reserves) and to the family’s asset structure.

If you outline a specific case—such as a gift for purchasing a home, transferring property, or gifting shares of a family-owned company (SL)—it is possible to further refine the tax and legal structure to maximize safety and minimize cost.

And remember: if you need expert support, a gestoría in Palma de Mallorca with experience in tax and inheritance law can help you avoid mistakes and protect your family wealth.