Succession tax is becoming a political weapon in Spain with the left defending its importance and the right stating that it is unfair. The last chapter of this “war” comes from the sunny Canary Islands.
The government of the Canary Islands, currently led by Ángel Víctor Torres from the PSOE (Socialist party), has announced several tax increases with the succession tax among them.
Since 2008, the succession tax in the Canary Island has been subsidized by 99 percent. In practice, this is like removing the tax because governments tend to leave that last one percent active in order to get all the information that comes with the tax returns.
Next year, starting January 1, the succession tax will come back to work. Parliament has not approved the change though, so we will get some news in the coming future.
As it is now, the new regulation will subsidize just the first 300,000 €. From 300,000 €, the rate of the tax will increase by 10 percent for each 50,000 €. So from 300,001 to 350,000, the tax subsidy will be 90 percent, from 350,001 to 400,000 an 80 percent, and so on.
The subsidy will affect the heir from the so-called group 1 and 2. This applies to ascendants and descendants, but not siblings, cousins, or other relatives.
With this increase, the Canary Islands’ government wants to finance a 12 percent enhancement in social expenses.
Other taxes will also be affected. For example, the minimum rate of the income tax will increase from 24 to 25 for the lowest incomes and even more for those that make more than 120,000 € per year.
The IGIC, the special VAT used in the Canary Islands, will also increase its rates up to 15 percent for luxury items, though it will still be far from the 21 percent the Spaniards in the peninsula have.
If you have properties in the Canary Islands, you may be interested to learn information about the possibilities you have for your legacy. In principle, if you are a UK resident, the succession tax that will apply is the national one, not the Canary Islands one. However, in case you have any chance to be subject to the Canary Islands’ succession tax, you may want to get information now about your chances.
In any case, if you have properties in Spain, we highly recommend that you make a will. Taking into consideration that this will not affect your UK legacy, it is the best way to make things easy for your heirs.