The Wealth Tax in the Balearic Islands
is Reduced, but Not Abolished
The Parliament of the Balearic Islands has approved an amendment to the 2024 Budget that redefines the rules of the game for Wealth Tax in the region. The key modification raises the minimum exemption from this tax from seven hundred thousand euros (€700,000) to a threshold of three million euros (€3,000,000). This change has a direct impact on investors with assets in the range of up to €3,000,000, who will now be exempt from the tax.
The measure translates into good news both for investors who already paid the tax in the affected band and for those with assets over €3 million. While the former benefit from total exemption from the tax, the latter will see a reduction in the amount they have to pay annually.
Calculation of wealth tax in the Balearics
It is important to remember that Wealth Tax is an annual tax that is payable on 31st December of each year and affects the wealth owned by the individual on that date. The calculation formula involves considering assets and subtracting the relevant deductions, which include private loans and mortgages.
Once the net wealth has been calculated, depending on the taxpayer’s tax residence, the Balearic Islands table or the State table will be used to calculate the total payable amount.
Investors who are tax resident in the Balearic Islands will use the table of the Autonomous Community:
| Net Tax Base (€) | Tax Payable | Remaining Taxable Base up to | % Applicable |
| € – | € – | €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 | €2,727,479.00 | 2.35 |
| €5,454,958.00 | €100,639.06 | €5,454,957.99 | 2.9 |
| €10,909,951.99 | €258,832.84 | Onwards | 3.45 |
While non-tax residents may choose to use the State table for the calculation:
| Net Tax Base (€) | Tax Payable | Remaining Taxable Base up to |
% Applicable |
| € – | € – | €167,129.45 | 0.2 |
| €167,129.45 | €334.26 | €167,123.43 | 0.3 |
| €334,252.88 | €835.63 | €334,246.87 | 0.5 |
| €668,499.75 | €2,506.86 | €668,499.76 | 0.9 |
| €1,336,999.51 | €8,523.36 | €1,336,999.50 | 1.3 |
| €2,673,999.01 | €25,904.35 | €2,673,999.02 | 1.7 |
| €5,347,998.03 | €71,362.33 | €5,347,998.03 | 2.1 |
| €10,695,996.06 | €183,670.29 | Onwards | 3.5 |
It is recommended that those who have a choice between the regional and state tables choose the state table, as the amount payable will be lower.
To clarify the impact of this legislative modification, let us consider some practical examples:
Case study 1
The individual who has an investment on the island of, for example, €3,500,000, will go from paying tax on €2,800,000 to paying tax on a taxable base of €500,000. It is important to note that on a taxable base of €2,8000,000, a foreigner would be paying a total of €28,046.26 per year in wealth tax whereas with a taxable base of €500,000 the tax is reduced to a total of €1,664.36. A very significant difference.
Case study 2
An investor with assets totalling €9,500,000 changes from being eligible for a deduction of €700,000 to a deduction of €3,000,000. Taking into account the state deduction alone, the investor will go from having a net worth of €8,800,000 to €6,500,000. Therefore, the wealth tax payable annually will be reduced, although the amount will still be more than considerable and tax strategies should be sought that allow the tax savings to be greater. Before 2024, the investor would be paying €143,854.37, while from 2024 onwards he will pay a total of €95,554.37.
Strategies to reduce Wealth Tax
For those buyers whose investments exceed three million euros, and therefore still have to deal with the tax, there are different strategies to consider:
-
Buying properties with several investors to increase the minimum exempt amount. -
Finance the acquisition at the time of purchase in order to deduct the acquired debt, the team of mortgage experts at Lionsgate Capital will be able to explain the best options. -
Buying through foreign companies with more than 50% of their assets outside Spain.
Despite this encouraging news, it is imperative that investors in the Balearics take advice and follow a sound strategy when buying property in Spain. Tax legislation may change in the future, and it is crucial to be prepared. If in doubt or for personalised advice on buying property or investments in the country, we recommend investors to contact professionals who can provide valuable guidance to ensure they maximise tax benefits and minimise potential tax consequences in an ever-changing environment. At Despacho Lamas, we have more than 35 years of specialisation in real estate law and foreign investment. We are dedicated to offering a comprehensive and high-quality service in these areas. We will be pleased to assist you and provide you with the expert advice you need.
Article by Malu Lamas Colombas
Legal advisor and economist in Despacho Lamas
Despacho Lamas was founded in Palma de Mallorca in 1989 and is specialised since its beginnings in real estate law and consultancy for foreign investments (EC members and third countries) in the Balearic Islands.
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