Landmark Tax Reform for the Agricultural Sector in the Balearic Islands: Law 6/2025

On 25 July 2025, Ley 6/2025, de Presupuestos Generales de la Comunidad Autónoma de las Illes Balears (Act 6/2025 on the General Budget of the Autonomous Region of the Balearic Islands) entered into force, marking the culmination of a long-standing demand of the Balearic agricultural sector: the establishment of a specific tax framework that recognises the economic and social particularities of agricultural activity and that facilitates both intergenerational transfer and the expansion and modernisation of farms.

As we noted in our previous article, in which we analysed in depth the rebates applicable to inheritances and gifts in the Balearic Islands, rules that directly benefit the agricultural sector have also been approved, reinforcing the regional legislator’s commitment to the competitiveness and sustainability of the Balearic countryside.

Through its Second Final Provision, the Act introduces four far-reaching measures in the Transfer Tax and Stamp Duty (ITP and AJD) and in the Inheritance and Gift Tax (ISD), set out in the new Articles 14 sexties, 19 ter, 32 and 47 bis of the regional consolidated text. These measures, two rebates and two reductions, are designed to cut drastically the tax charged on key transactions in the sector.

1. 99% Regional Rebate on Transfer Tax (ITP)

This new provision establishes a regional rebate of 99% of the tax liability in Transfer Tax (Impuesto sobre Transmisiones Patrimoniales, ITP) for transfers for consideration and leases of rural land or other non-buildable land, including constructions that are indispensable for the operation of an agricultural holding, as well as any element or asset necessary for its operation.

Main requirements: the purchaser or tenant must be a professional farmer or the holder of a priority agricultural holding under Ley 19/1995, de modernización de las explotaciones agrarias (Act 19/1995 on the Modernisation of Agricultural Holdings). The assets must be allocated to the holding, the activity must be maintained for a minimum of five years, more than 50% of the purchaser’s income must derive from agricultural activity and, in the case of ancillary dwellings, their floor area may not exceed 130 square metres, with swimming pools and sports facilities excluded as ancillary elements.

Before the reform: regional legislation did not provide for a specific rebate for these transactions, and the general rate of Transfer Tax (ITP) in the Balearic Islands (between 8% and 13% depending on the bands) applied, except in very specific cases of State agricultural benefits, with more restrictive conditions and without such a high rebate percentage.

2. 99% Regional Rebate on Stamp Duty (AJD)

Running in parallel with the previous measure, this one focuses on Stamp Duty (Impuesto sobre Actos Jurídicos Documentados, AJD), providing a 99% rebate on notarial deeds that document transfers, leases or consolidations of rural land and elements necessary for the agricultural holding, as well as the transfer or lease of equipment or assets allocated to it.

Requirements: identical to those of the previous measure, requiring the status of professional farmer or holder of a priority holding, allocation of the assets to agricultural activity, maintenance of the activity for five years, agricultural income exceeding 50% of total income and a floor-area limit for ancillary dwellings.

Before the reform: the general rate of Stamp Duty (AJD) in the Balearic Islands (1.2%) applied without specific reductions for this type of transaction, which meant a significant cost in the notarial formalisation of agricultural transfers and consolidations.

3. 100% Regional Reduction in Inheritance and Gift Tax (ISD) for Acquisitions on Death

This article introduces a 100% reduction in the taxable base of Inheritance and Gift Tax (ISD) where, in acquisitions on death (including succession agreements), rural land, indispensable constructions or elements allocated to an agricultural holding located in the Balearic Islands are received, as well as shareholdings in entities whose assets consist of such property.

Requirements: notification of the change of ownership to the island agricultural register, allocation of the assets to the holding, maintenance of the activity for five years, generation of more than 50% of income from agricultural activity before the end of the fourth year and a floor-area limit for ancillary dwellings.

Before the reform: the regional reduction was 95%, limited exclusively to land located in protected rural land areas, areas of agricultural interest or areas of environmental significance, provided that at least 33% of the estate was included in those zones, applied proportionally and evidenced by a certificate from the competent regional department. This reduction also applied to shareholdings in entities whose assets met those requirements, and it was incompatible with other State or regional reductions on the same assets.

4. 100% Regional Reduction in ISD for Gratuitous Acquisitions Inter Vivos: Article 47 bis

For the first time, a 100% reduction is established for gifts of rural land, allocated elements or assets linked to agricultural holdings, provided that the beneficiaries are the spouse, descendants or collateral relatives by blood up to the third degree, and the same conditions as in the other measures are met.

A Structural Change for the Balearic Countryside

Taken together, these four measures represent a substantial change in the taxation of agricultural holdings in the Balearic Islands. The almost complete elimination of tax on transfers, notarial formalisation, inheritance or gift, combined with the clarity of the requirements, provides a legal and tax environment more favourable than that in force in most autonomous regions.

Nevertheless, the effective application of these benefits requires rigorous prior analysis and strict compliance with the time-related and substantive requirements. At Vicens Advisors we help our clients in the agricultural sector to structure their transactions so as to maximise tax savings and ensure legal certainty for each transaction.

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