Starting January 1, 2020, the Canary Islands will have a new succession tax. If you follow this blog, you likely know that the whole country of Spain is involved in a controversy about the succession tax.
First, this is because the tax is different in every single autonomous community (Spanish administrative regions), making it very unfair for those citizens living in the regions with a higher tax.
Second, because while left wing parties are defending it because it is a good way to redistribute income and have revenue for the governments, the right wing is trying to remove it. Of course, more or less half of the country agrees with ones and the other half with the others.
The reality is that Madrid makes the difference. It is the region that receives more money thanks to this tax, but it is due to its great economic power, not to high taxation. In fact, Madrid has a low taxation for successions and makes many Spaniards try to move their fiscal residence.
This time it is the Canary Islands who gives us news. They are going to raise this tax that was practically removed in 2008. However, the new increase has important nuances. According to the Canary government, it will only affect those who inherit more than 300,000 €, which for Spanish level is not bad. In fact, the 300,000 € exception will affect 92 percent of the population.
Besides, descendants under 21 years old will have an exemption of 99.9 percent of the tax. Before the new law, descendants enjoyed this exemption regardless of their age, but now for those over that age, the percentage applied to the value of the legacy increases along with the amount inherited.
According to the Tax Authority, with the new law, in order to pay 100 percent of the tax, the heritage has to surpass 1.2 million euros.
The reasons behind this unpopular decision is that the government has increased public spending on about 12 percent. Since the succession tax will only add about 18 million euros, which for a regional government like Canary Islands one is not really much, the government will also raise the income tax and the VAT tax. In total, they expect to get an extra 73 million euros.
The Finance Counsellor of the Canary Island government has recently stated that in the last four years from 2015 to 2019, the collection of taxes from succession has decreased by about 50 million euros, while the rejections of inheritances are marking records.
For non-residents, the successions are taxed by the national law.