Inheritance Tax Deductions
In The Canary Islands
This presentation has been updated and is valid for 2016.*
*myAdvocate Europe Ltd does not accept responsibility for losse...
In 2001 the Spanish government devolved the power to set
inheritance tax rates and deductions o the regional
parliaments.
...
Most regions enacted tax laws that applied generous
deductions only to those beneficiaries who were resident in
the region...
Recently, on September 3rd 2014, the European Court of
Justice ruled that such laws were discriminatory and contrary
to Eu...
Accordingly, the Spanish government has enacted new
legislation (Ley 26/2014) which makes any deductions that
may be appli...
The main impact of the new legislation is as follows:
1) If the deceased was a non-resident, living in another
European co...
2) If none of the assets to be inherited are located in Spain,
then the resident beneficiaries should apply the legislatio...
3) If the deceased was resident in one of the Spanish regions
and the beneficiaries were non-resident, and living in anoth...
The regional level deductions available in Canary Islands
were enacted by the parliament in Santa Cruz and in their
curren...
Spanish Inheritance law first assigns beneficiaries to groups
according to the degree of kinship with the deceased:
Group ...
Personal deductions as amended by Ley 04/2012:
Personal Exemptions – Children Under 21
Deductions
Under 10
years old
Deduc...
The following are the personal deductions as amended by
regional law in the Canary Islands:
Personal Exemptions – Other Re...
Special Discounts for Groups I & II
● Any inheritance tax that falls due to be paid under the
Succession Tax rules in the ...
If the beneficiary has a disability:
● An exemption of €72,000 additional to any personal
exemption if disability > 33% an...
If the beneficiary has a disability:
● If the disability is > 66% then the additional discount
increased to €400,000 (in a...
If the beneficiary is elderly:
● An exemption of €125,000 to any beneficiary more than
75 years old
● This exemption is no...
Inheritance of the Family Home
● Deduction of 99% of value of the property up to a limit
of 200,000€ for children under th...
Inheritance of the Family Home
● The same deduction may be applied to those blood
relatives over the age of 65 who have li...
Deductions in transfer of Family Business
● Tax deduction of 99% of the value of the business
● Must be children or spouse...
Deductions in transfer of Family Business
● The business may not be sold for a period of no less
than 10 years
● The maxim...
Tax deductions on income from Life Insurance:
● Where the beneficiary is a descendant, spouse or parent of
the deceased, a...
Other Deductions:
As a general rule the following deductions may be made on
any estate:
● Funeral Expenses
● Final Medical...
Other Deductions Cntd:
● Debts held be the deceased that are evidenced by
public documents e.g. a mortgage
24
Special Rules
● Where the same assets are subject to two or more
processes of inheritance by Groups I & II beneficiaries
w...
Special Rules
26
Reduction % When the inheritance takes place:
50
In the 12 months following the previous
inheritance
30
B...
Tax Rates in the Canary Islands
Taxable Sum Tax Payable On This Sum Any Remainder Up To Applicable Rate on
Remainder (%)
0...
Tax Rates in the Canary Islands Cntd
Taxable Sum Tax Payable On This Sum Any Remainder Up To Applicable Rate on
Remainder ...
Existing Wealth
Once the relevant tax rate has been applied the result is
multiplied by a coefficient determined by the ex...
Existing Wealth
The Groups referred to consist of the following beneficiaries:
Group I Children, including adopted childre...
Each year in Spain thousands of expats pay more
tax on inheritance than they should – simply
because they fail to follow s...
To find out where to get expert advice, in English, about how
to reduce your liability for inheritance tax, go to:
Probate...
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Inheritance tax deductions canary islands

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Deductions and exemptions in inheritance taxes in the Canary Islands

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Inheritance tax deductions canary islands

  1. 1. Inheritance Tax Deductions In The Canary Islands
  2. 2. This presentation has been updated and is valid for 2016.* *myAdvocate Europe Ltd does not accept responsibility for losses of any type consequent upon reliance on the information contained in this presentation.Please consult a lawyer before acting. Inheritance Law in the Canary Islands 2
  3. 3. In 2001 the Spanish government devolved the power to set inheritance tax rates and deductions o the regional parliaments. Inheritance Law in the Canary Islands 3
  4. 4. Most regions enacted tax laws that applied generous deductions only to those beneficiaries who were resident in the region over the balance of the previous five years. Inheritance Law in the Canary Islands 4
  5. 5. Recently, on September 3rd 2014, the European Court of Justice ruled that such laws were discriminatory and contrary to European Law. 5 Inheritance Law in the Canary Islands
  6. 6. Accordingly, the Spanish government has enacted new legislation (Ley 26/2014) which makes any deductions that may be applied to residents also available to non-residents who are EU citizens. 6 Inheritance Law in the Canary Islands
  7. 7. The main impact of the new legislation is as follows: 1) If the deceased was a non-resident, living in another European country then the beneficiary may apply those deductions and exemptions provided by the regional government in which the majority of the inherited assets are located. 7 Inheritance Law in the Canary Islands
  8. 8. 2) If none of the assets to be inherited are located in Spain, then the resident beneficiaries should apply the legislation enacted by the regional government where they are normally resident. 8 Inheritance Law in the Canary Islands
  9. 9. 3) If the deceased was resident in one of the Spanish regions and the beneficiaries were non-resident, and living in another European Union country, then they may apply those deductions and exemptions available to residents of the region in which the deceased was resident. 9 Inheritance Law in the Canary Islands
  10. 10. 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 10
  11. 11. 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 11
  12. 12. 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 11-15 years old Deduction of 100% up to a maximum of €92,150 16-18 years old Deduction of 100% up to a maximum of €57,650 19-21 years old Deduction of 100% up to a maximum of €40,400 12
  13. 13. 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 maximum 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 13
  14. 14. Special Discounts for Groups I & II ● Any inheritance tax that falls due to be paid under the Succession Tax rules in the Canary Islands, as laid out here shall be discounted by 99,9%. 14
  15. 15. If the beneficiary has a disability: ● 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) 15
  16. 16. If the beneficiary has a disability: ● If the disability is > 66% then the additional discount increased to €400,000 (in addition to the amount provided at State level: € 150,253) 16
  17. 17. 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 17
  18. 18. Inheritance of the Family Home ● Deduction of 99% of value of the property up to a limit of 200,000€ for children under the age of majority ● Property may not be sold for 5 years after inheritance 18
  19. 19. Inheritance of the Family Home ● The same deduction may be applied to those blood relatives over the age of 65 who have lived in the family home for two years prior to the date of death 19
  20. 20. 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 exist, any relative 'to third degree of sanguinity' may benefit from exemption (95%) 20
  21. 21. 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 21
  22. 22. 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. 22
  23. 23. Other Deductions: As a general rule the following deductions may be made on any estate: ● Funeral Expenses ● Final Medical Expenses of the Deceased 23
  24. 24. Other Deductions Cntd: ● Debts held be the deceased that are evidenced by public documents e.g. a mortgage 24
  25. 25. Special Rules ● Where the same assets are subject to two or more processes of inheritance by Groups I & II beneficiaries within a period of 10 years, in the second and any subsequent inheritance processes, the taxable amount shall be reduced by any amount of tax paid in previous inheritance processes. A scale is applied as follows: 25
  26. 26. Special Rules 26 Reduction % When the inheritance takes place: 50 In the 12 months following the previous inheritance 30 Between 1 year and 5 years following the previous inheritance 10 More than 5 years since the previous inheritance
  27. 27. 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 27
  28. 28. 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 28
  29. 29. 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 29
  30. 30. 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 30
  31. 31. Each year in Spain thousands of expats pay more tax on inheritance than they should – simply because they fail to follow some simple rules. 31
  32. 32. 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 32

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