Inheritance Tax DeductionsIn The Canary Islands

This presentation has been updated and is valid for 2014.

Inheritance Law in Canary Islands

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There are special regional tax deductions and exemptions

passed by the local Canary Islands government that only

apply to those beneficiaries who have been resident in the

region over the balance of the previous five years.

Inheritance Taxes in the Canary Islands

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If you have NOT been resident in the Canary Islands over

the balance of the last five years then, when determining

your inheritance tax liability, you may only apply the

deductions and exemptions approved by the CENTRAL

government.

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Inheritance Taxes in the Canary Islands

The central government exemptions and deductions are not

as generous as the regional exemptions.

This has caused complaints that the inheritance tax laws in

Spain are discriminatory against non-residents.

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Inheritance Law in the Canary Islands

The regional level deductions available in Canary Islands

were enacted by the parliament in Santa Cruz and in their

current form are specified in Legislative Decree 1/2009.

The most important changes to State laws can be

summarised as follows:

Inheritance Tax Law in the Canary Islands

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Spanish Inheritance law first assigns beneficiaries to groups according to the degree of kinship with the deceased:

Group I Children, including adopted children, under the age of 21

Group II All other descendants, spouses and parents

Group III Close relatives such as brothers and sisters, grandparents,

aunts and uncles

Group IV More distant relatives

Personal Exemptions

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Personal deductions as amended by Ley 04/2012:

Personal Exemptions – Children Under 21

  Deductions

Under 10 years old

Deduction of 100% up to a maximum of €138,650

10-15 years old

Deduction of 100% up to a maximum of €92,150

15-18 years old

Deduction of 100% up to a maximum of €57,650

18-21 years old

Deduction of 100% up to a maximum of €40,400

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The following are the personal deductions as amended by regional law in the Canary Islands:

Personal Exemptions – Other Relatives

  Deduction

Group II For those children over the age of 21 the deduction shall be €23,125 and for spouses the maximum deduction shall be €40,400. Other

descendants, parents €18,500

Group III Deduction of €9,300.

Group IV No deductions available

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If the beneficiary is disabled:

An exemption of €72,000 additional to any personal

exemption if disability > 33% and < 66% (in addition to

the amount provided at State level: €47,858)

If the disability is > 66% then the additional discount

increased to €400,000 (in addition to the amount provided

at State level: € 150,253) 10

If the beneficiary is elderly:

An exemption of €125,000 to any beneficiary more than

75 years old

This exemption is not compatible with the deduction for

disablity

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Deductions in transfer of Family Business

Tax deduction of 99% of the value of the business

Must be children or spouse to inherit

If no child or spouse any relative 'to third degree of

sanguinity' may benefit from exemption

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Deductions in transfer of Family Business

The business may not be sold for a period of no less than

10 years

The maximum value of the business may be €3,000,000

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Inheritance of the Family Home

Deductions exists for children under the age of majority

99% of value of the property up to a limit of 200,000€

Property may not be sold for 5 years after inheritance

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Tax deductions on income from Life Insurance:

Where the beneficiary is a descendant, spouse or parent of

the deceased, an exemption of 100% of all income up to

€23,150 may be applied.

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Other Deductions:

As a general rule the following deductions may be made on any estate:

Funeral Expenses

Final Medical Expenses of the Deceased

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Other Deductions Cntd:

Debts held be the deceased that are evidenced by public

documents e.g. a mortgage

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Tax Rates in the Canary Islands

Taxable Sum Tax Payable On This Sum Any Remainder Up To Applicable Rate on Remainder (%)

0 0 7993,46 7,65

7993,46 611,5 7987,45 8,5

15980,91 1290,43 7987,45 9,35

23968,36 2037,26 7987,45 10,2

31955,81 2851,98 7987,45 11,05

39943,26 3734,59 7987,46 11,9

47930,72 4685,1 7987,45 12,75

55918,17 5703,5 7987,45 13,6

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Tax Rates in the Canary Islands Cntd

Taxable Sum Tax Payable On This Sum Any Remainder Up To Applicable Rate on Remainder (%)

63905,62 6789,79 7987,45 14,45

71893,07 7943,98 7987,45 15,3

79880,52 9166,06 39877,15 16,15

119757,67 15606,22 39877,16 18,7

159634,83 23063,25 79754,3 21,25

239389,13 40011,04 159388,41 25,5

398777,54 80655,08 398777,54 29,75

797555,08 199291,4 And Above 34

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Existing Wealth

Once the relevant tax rate has been applied the result is multiplied by a coefficient determined by the existing wealth of the beneficiary as well as the group to which they belong:

Existing Wealth Groups

(In Euros) I & II III IV

0 to 390,657 1 1.5882 2

390,657 to 1,965,309 1.05 1.6676 2.1

1,965,309 to 3,936,629 1.1 1.7471 2.2

More than 3,936,629 1.2 1.9059 2.4

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Existing Wealth

The Groups referred to consist of the following beneficiaries:

Group I Children, including adopted children, under the age of 21

Group II All other descendants, spouses and parents

Group III Close relatives such as brothers and sisters, grandparents,

aunts and uncles

Group IV More distant relatives

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Each year in Spain thousands of expats pay more

tax on inheritance than they should – simply

because they fail to follow some simple rules.

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To find out where to get expert advice, in English, about how

to reduce your liability for inheritance tax, go to:

Probate Services in the Canaries

Expert Probate Services in the Canary Islands

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