Taxation In Balearics In 2016

The Balearics Islands’ government has published the 2016 draft budget for the region. This includes higher tax rates for the most important taxes in the region.

The Balearics Islands’ government has published the 2016 draft budget for the region. This includes higher tax rates for the most important taxes in the region.

Personal Income Tax (Impuesto sobre la Renta de las Personas Físicas)

With effect from 31st December 2015 (this means that this measure will be applicable for the whole fiscal year 2015, so if passed it will be retrospective), the number of tax brackets for personal income tax progressive rates will be increased and the tax rates will be higher for income exceeding €70,000.

Current regional tax rates, according to 2015 budget:

Taxable base €	Regional tax rate
0 – 10,000	9.5%
10,000 – 18,000	11.75%
18,000 – 30,000	14.75%
30,000 – 48,000	17.75%
48,000 – 75,000	19.25%
75,000 onwards	21.50%

Regional tax rates according to 2016 draft budget:

Taxable base €	Regional tax rate
0 – 10,000	9.5%
10,000 – 18,000	11.75%
18,000 – 30,000	14.75%
30,000 – 48,000	17.75%
48,000 – 70,000	19.25%
70,000 – 90,000	22%
90,000 – 120,000	23%
120,000 – 175,000	24%
175,000 onwards	25%

Note that the above tables only include the regional portion of the tax. The national portion of tax will be added on top.

Wealth Tax (Impuesto sobre el Patrimonio)

Under the state rules, each individual, regardless of residence, receives an annual allowance of €700,000 for wealth tax purposes.

Islas Baleares increased its individual deduction for wealth tax from €700,000 to €800,000 from 1st January 2015. However, with the new 2016 draft budget it proposes to re-introduce the €700,000 deduction with effect from 31st December 2015 (so the measure will be retrospective and applicable for the whole fiscal year 2015 if passed).

Additionally, they have modified the applicable wealth tax rates, increasing significantly the tax due, more than doubling the tax due in some bands.

Wealth tax rates according to 2016 draft budget:

Taxable base €	Tax rate
0 – 170,472	0.28%
170,472 – 340,938	0.41%
340,938 – 681,870	0.69%
681,870 – 1,363,739	1.24%
1,363,739 – 2,727,479	1.79%
2,727,479 – 5,454,958	2.35%
5,454,958 – 10,909,915	2.90%
10,909,915 onwards	3.45%

All the rates have increased. For example, currently the lowest rate is 0.2%, and this increases to 0.28%. At the other end of the scale the top rate increases from 2.5% to 3.45%.

Succession and Gift Tax (Impuesto sobre Sucesiones y Donaciones)

Currently, a 99% deduction is applicable for descendants, ascendants and spouses on inheritances taxable under the Balearics Islands’ rules. The amount is the result of deducting from the discounted quota (‘cuota bonificada’), the taxable base multiplied by 0.01. So the payable tax will be 1% of the taxable base no matter what the value of the inheritance is.

The 2016 draft budget removes this deduction and includes the following progressive succession and gift tax rates for group I and II beneficiaries (basically, spouses and children). This will apply to deaths from 1st January 2016 onwards.

Taxable base €	Tax rate
0 – 700,000	1%
700,000 – 1,000,000	8%
1,000,000 – 2,000,000	11%
2,000,000 – 3,000,000	15%
3,000,000 onwards	20%

The Balearics budget needs to go through the normal parliamentary procedures and, subject to any amendments in parliament, will be probably approved by the end of the year.

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Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.