Islas Canarias - Janet Anscombe

Succession Tax Rates
Islas Canarias
This leaflet should be read in conjunction with our brochure ‘The Blevins Franks Guide to Estate Planning
in Spain’. As explained in that brochure, each Autonomous Region such as Islas Canarias sets its own rates
of succession tax.
The rates of tax and exemptions for Islas Canarias are set out below. From this information, you will
appreciate that the Spanish succession tax regime is extremely complex, particularly in comparison with
the UK regime where there is only one rate of inheritance tax, 40%, which applies irrespective of the
relationship or wealth of the beneficiary (apart from transfers between spouses which are tax exempt).
It is therefore possible in this leaflet to provide only guidance on Spanish succession tax and the potential
tax liabilities that you and your family may face. To understand the potential impact on your assets it is
essential to obtain personal advice, based on your family’s situation and estate planning objectives.
Which assets are liable to Spanish succession tax?
Assets situated in Spain; and/or
Worldwide assets inherited by a Spanish resident.
If you leave non-Spanish assets (e.g. foreign investment funds) to a non-Spanish resident (e.g. children
living in the UK) Spanish succession tax does not apply.
However, all assets passing to a surviving spouse resident in Spain are subject to Spanish succession tax.
The rates of Spanish succession tax depend on four factors:
1. Your relationship with the beneficiary.
2. The value of the inheritance (i.e. the amount received by the beneficiary).
3. The total wealth of the beneficiary.
4. The Spanish region of residence as each ‘Autonomous Region’ sets its own rates and exemptions.
'All assets passing to a surviving spouse resident in Spain
are subject to Spanish succession tax.'
Succession Tax Rates Islas Canarias
Relationship with Beneficiary
In Islas Canarias, (as in the rest of Spain) the relationship with the beneficiary is divided into four groups
to determine the rates of tax that will apply:
GROUP I
Natural and adopted children and grandchildren under 21
GROUP II
Natural and adopted children and other descendants aged 21 and over
Parents
Spouses
GROUP III
In-laws and their descendants
Step-children
Brothers and sisters and other blood relatives
GROUP IV
All others including unmarried partners (although in Islas Canarias couples
registered as a pareja de hecho are included in Group II)
Tax-Free Allowances
The Islas Canarias Spanish succession tax-free allowance for inheritances received by members of different
groups is limited to:
GROUP I
€40,400 to €138,650, depending on the age of the children up to 21.
GROUP II
€40,400 (spouses)
€23,125 (children over 21)
€18,500 (other ascendants or descendants)
GROUP III
€9,300
GROUP IV
Nil
In Islas Canarias there is a 99.9% reduction of the final succession tax payable by spouses and children
(Groups I & II).
Rates of Succession Tax
On inheritances above the tax free allowances, the rates of tax for Groups I and II beneficiaries start at 7.65%
and rise to 34%. The following examples illustrate the higher rates of tax that are imposed on larger inheritances:
VALUE OF INHERITANCE RECEIVED
(by, for example, spouse or children)
€
AMOUNT OF
SUCCESSION TAX PAYABLE
€
€250,000
€427
€500,000
€1,108
€1m
€2,681
€2.5m
€7,781
Wealth of Beneficiary
The rates of Spanish succession tax are increased significantly for inheritances received by Groups III and
IV beneficiaries and potentially increased further dependening on the total net worth of the beneficiary.
This is effected by applying a ‘multiplier’ to the standard rate for Groups I and II beneficiaries. The
following table illustrates the impact of the ‘multiplier’ system:
TAX MULTIPLIER
NET WORTH OF
BENEFICIARY
GROUPS I AND II
GROUP III
GROUP IV
€250,000
1.00
1.59
2.0
€1m
1.05
1.67
2.1
€2m
1.10
1.75
2.2
To illustrate how the ‘multiplier’ works, the tax on an inheritance of €250,000 received by a
child would be €427 but if this same inheritance was received by a step-child the tax would be
€67,918 (€42,716 x 1.59), assuming the net worth of the step-child is less than €400,000.
Main Home Relief
A major concern for many couples is the potential tax liability arising on the first death, when the family
home in Spain is inherited by the surviving spouse.
In Islas Canarias, there is an important tax relief of 99.9% on the value of your main home provided that:
It must be the home of the deceased.
The inheritor must be the spouse or a direct blood relative (i.e. Group I or II).
The property is retained for five years following death.
However, the maximum deduction is €200,000 per inheritance. Tax planning is therefore essential for
most families living in Islas Canarias.
'To understand the potential impact on your assets
it is essential to obtain personal advice, based on
your family’s situation and estate planning objectives.'
The Next Step
This leaflet can provide only a guide to how the Spanish succession tax regime
operates for residents of Islas Canarias, but should serve to demonstrate the
complexity of the succession tax rules and the care required to achieve the
right estate plan for you.
Blevins Franks has been advising British families living in Spain for over
25 years. Our experienced advisers who live and work in Islas Canarias
are supported by qualified tax and legal specialists based in our offices in
London, whose expertise in UK and Spanish cross-border tax and estate
planning is, we believe, unsurpassed. With careful planning, it is usually
possible to structure your Estate Plan to minimise your succession or
inheritance tax liabilities.
As the next step, we suggest that you arrange a meeting with your local
Blevins Franks adviser to take advantage of our personal Estate Planning
Review Service.
'With careful planning, it is usually possible
to structure your Estate Plan to minimise
your succession or inheritance tax liabilities.'
contact us
922 716 079
w w w. b l e v i n s f r a n k s . c o m
This leaflet has been prepared based on the laws of the UK and Spain as at 16 March 2016. The tax rates, scope and reliefs may change. Any statements concerning taxation are based
upon our understanding of current taxation laws and practices which are subject to change. It is a general guide only and, in explaining complex matters in a simple way, cannot be relied
upon as a substitute for professional advice. Blevins Franks cannot accept any responsibility for loss occasioned by any person’s action (or refraining from action) as a result of reading
this guide. You must take detailed professional advice relevant to your particular circumstances before any action is taken.
Blevins Franks Financial Management Limited (BFFM) is authorised and regulated by the Financial Conduct Authority in the UK, reference number 179731. Where advice is provided
outside the UK, via the Insurance Mediation Directive from Malta, the regulatory system differs in some respects from that of the UK. Blevins Franks Trustees Limited is authorised and
regulated by the Malta Financial Services Authority for the administration of trusts and companies. Blevins Franks Tax Limited provides taxation advice; its advisers are fully qualified
tax specialists. This promotion has been approved and issued by BFFM.
D35ES-IC.001.Mar2016 © Blevins Franks