Following the lead of most Spanish regions, such as Andalusia, Murcia, Valenciana and the Balearic Islands, the Canary Islands are now following suit with a actual abolition of inheritance tax and gift tax. This entry provides more information on the new inheritance tax in the Canary Islands.
A 99.9% reduction in inheritance tax for extended family
There will be a 99.9% reduction in the inheritance tax due for the extended family. These are the surviving partner, children, as well as brothers & sisters and nieces & nephews. This extended family will thus pay virtually no inheritance tax.
Note: in case of an inheritance in Spain, the heirs are still municipal capital gains tax owed on the transfer of property. In addition, there may be Flemish inheritance tax to pay.
A 99.9% reduction in gift tax for partner and children
There will also be a 99.9% reduction in gift tax. Some limited conditions do apply here:
- the donation is executed through a notarial deed;
- and no donation must have been received in the past 3 years applying the 99.9% reduction.
However, unlike inheritance tax, the reduction is limited to the surviving spouse and children.
Note: for the recipient of a gift, there will be virtually no more gift tax, but the donor still pays national capital gains tax and municipal capital gains tax on real estate. So a donation is not necessarily fiscally beneficial.
Decision
Thanks to the reduced - effectively abolished - inheritance tax, the Canary Islands are broadly one of the most interesting tax regions in Spain.
