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Tenerife vista; Canary Isles changes for income tax, succession & gift tax 2020

Get to know the 2020 changes to income tax and succession tax that could affect you and your heirs if you’re living in the Canary Isles.

While the Spanish state budget for 2020 is still pending, the local government in the Canary Isles has approved its regional budget for 2020. This includes changes to income tax and succession and gift tax (inheritance tax), applicable from 1 January 2020.

Income tax for the Canary Isles

The personal income tax rates for general income are a combination of regional and state rates. Last year, the top regional rate in the Canary Isles was 22.5% but two new brackets have been introduced for 2020: 

  • 25% for income over €90,000 
  • 26% for income over €120,000. 

When you add the state income tax rates, the top rate for Canary Isles taxpayers could be around 48.5%.

The state rates will be confirmed once the new Spanish coalition government has finalised its 2020 budget, hopefully around summertime. 

Spanish Succession and Gift Tax (SSGT) for the Canary Isles

The biggest changes approved in the 2020 Canary Islands budget affect the succession and gift tax rules. Last year, the 99.9% relief for SSGT was extended to include Group III beneficiaries, but now this relief has been scaled back. These are the new applicable rules.

Group I beneficiaries: Descendants under 21

The 99.9% relief remains applicable for both inheritance and lifetime gifts.

Group II beneficiaries: Descendants over 21, ascendants, spouses

The first €55,000 of tax due (i.e. after applying the tax rates and multipliers) always benefits from a 99.9% relief, for both inheritances and lifetime gifts. Any excess over €55,000 gets a variable relief depending on the calculated tax due.  

The reliefs range from 90% when the tax due is between €55,000 and €65,000, down to just 10% when the tax due is between €275,000 and €305,000. There is no relief applicable when the tax due is more than €305,000.

Succession and gift tax reliefs for Group II beneficiaries: 

TAX DUE (‘Cuota tributaria’) PERCENTAGE RELIEF
 €55,000 - €65,000  90%
 €65,000 - €95,000  80%
 €95,000 - €125,000  70%
 €125,000 - €155,000  60%
 €155,000 - €185,000  50%
 €185,000 - €215,000  40%
 €215,000 - €245,000  30%
 €245,000 - €275,000  20%
 €275,000 – €305,000  10%
 More than €305,000  No relief applicable


Group III beneficiaries: e.g. siblings, cousins, nieces/nephews (in-laws and stepchildren can also fall in this group) 

The same threshold and reliefs as Group II as outlined above but, in this case, it only applies to inheritances, not gifts. 

A case study under the new SSGT rules

While this SSGT reform could be disappointing, it may not affect your family. For example, we received a query from clients Mr & Mrs X concerned about the SSGT consequences for them under these new regional rules.

Their main residence in the Canary Isles is worth €330,000, they have a suitable investment bond held outside Spain valued at €460,000 and €5,500 in the bank in Spain. 

Once you deduct the main home allowance (99%, provided it is kept for five years, maximum €200,000) and the personal reduction (€40,000 for Group II beneficiaries), the total tax due is approximately €33,000. With no multipliers needed here, this falls below the €55,000 threshold so the 99.9% relief applies as it did before. The survivor’s estimated tax bill is around €30.

(All assets are jointly owned, and values include the 3% household items assumption. Figures have been rounded up).

Minimising Spanish Succession and Gift Tax

Although the SSGT tax allowances have been scaled back in the region, they continue to offer considerable tax savings for most beneficiaries compared to the pre-2016 Canary Isles tax rates. 

It is important to take steps to reduce or completely avoid succession and gift tax if there is indeed a liability in Spain – and also in the UK. With personalised, specialist advice there are steps you can take to make Spain a tax-efficient place to live, and to set up effective estate planning to make life easier and less costly for your heirs. 

For bespoke advice on your situation, contact Paul Montague, our Blevins Franks adviser for the Canary Isles.  

See more about taxes when living in Spain

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. Tax information has been summarised; individuals are advised to seek personalised advice.