Inheritance Tax by Spanish Region: Key Differences

Why Spanish Inheritance Tax Varies by Region

Spain's inheritance tax (Impuesto sobre Sucesiones y Donaciones, ISD) is a state tax that autonomous communities are authorised to modify within limits set by national law. They can:

• Increase or reduce the national tax scale
• Offer additional personal allowances beyond the national minimums
• Apply blanket bonificaciones (reductions) to the tax payable by certain categories of heir

The result is that Spain has 17 different effective inheritance tax regimes — all sitting on top of the same national base law. The regional rules apply based on where the deceased was habitually resident (for residents) or where the highest-value property is located (for non-residents).

For a non-resident owner of Mallorca property, the Balearic rules apply to the Spanish estate regardless of where the heirs live.

National Base Rules (State Law)

Before any regional modifications, the national rules provide:

• Personal allowances of €15,957 for Group II heirs (adult children, spouse, parents) — modest by European standards
• A progressive tax scale rising from 7.65% to 34% depending on the taxable base
• A multiplier based on the heir's pre-existing wealth, which can double the effective rate
• Allowances for disability

These national rules apply in full only when the autonomous community has not exercised its power to modify them — which, in practice, is increasingly rare for the most commonly inheriting groups.

Region-by-Region Comparison

How Non-Residents Are Taxed

Non-EU heirs and non-resident heirs were historically taxed under national rules only — a much less favourable position. Following the European Court of Justice ruling in 2014 (Case C-127/12), Spain was required to equalise the treatment of EU and non-EU heirs.

The current position for non-residents:

• If the deceased was non-resident and the estate includes Spanish property: the rules of the autonomous community where the highest-value Spanish asset is located apply
• If the heir is non-resident (but deceased was resident): the rules of the community where the deceased was resident apply
• Both scenarios now benefit from regional bonificaciones regardless of the heir's nationality or EU membership

This means that a British, German, Dutch, American, or Swiss heir of a Mallorca property applies Balearic rules and benefits from the 99% reduction.

The Importance of Domicile and Habitual Residence

The autonomous community whose rules apply is determined by the deceased's habitual residence in Spain — not the heir's residence, and not the location of the property (except for non-resident deceased, as above).

A Spaniard who was habitually resident in Madrid but owned a Costa del Sol property would have their estate governed by Madrid rules (99% reduction) — not Andalusia rules (also 99%, but the point is that the deceased's residence, not the property location, determines which region's rules apply for resident deceased).

For non-residents — which is most readers of this guide — the property location is what matters, and Mallorca falls under Balearic rules.

Planning Around Regional Differences

For owners with property in multiple Spanish regions, the region where the most valuable asset sits determines which rules apply to the non-resident estate. There is no mechanism to choose a more favourable region. However:

• Ensuring your Spanish estate is properly valued and that heirs are correctly classified can make a meaningful difference
• The Balearic regime is one of the most favourable in Spain — this is genuinely a significant advantage of Mallorca property ownership from an estate planning perspective
• For Catalonia property owners in particular, structures such as usufructo, lifetime donation, or holding through a Spanish company may be worth exploring with an expert