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99% reduction on succession and gift tax announced by regional Canary Islands’ government 

On 6th July 2015, Sr. Fernando Clavijo, the new Canary Islands Prime Minister announced in his acceptance speech that a 99% reduction for succession and gift tax will be introduced for relatives in groups I and II (children and spouses).

Furthermore, on 16th July 2015, Sra. Rosa Dávila, the Canary Islands regional tax minister, confirmed that this measure will be included in the 2016 Canary Islands budget and is expected to be approved in October 2015. According to government analysis, this 99% reduction will represent a saving of around €30 million for Canary Islands taxpayers next year.

Sra. Dávila also went on to say that they intend to introduce further tax reduc-tions for Canary Islands tax-payers by 2017.

The succession tax situation at present

At present, for assets based in the Canary Isles, the recipient beneficiary of these by means of an inheritance or gift, wherever they may live (including the UK), are responsible for the taxes due which are payable in Spain. At the same time, a Canary Islands resident inheritor of an estate or gift outside of Spain is liable to succession taxes in the Canary Isles on this increase in wealth. Other than small allowances available, there is no blanket exemption between spouses as there is in the UK and, importantly, the taxes due are expected in a relatively short period of time.

This tax is so punitive in some circumstances that some heirs have renounced their inheritances. Additio-nally, this tax has prompted many residents to move from the Canary Islands to other regions with more generous succession and gift tax allowances.

 

If approved – the game changer

This is a real game-changer for death and gift taxes for nearly every group I and II relative beneficiary. This includes non-residents with assets in the Canary Isles and for residents receiving assets from elsewhere. This 99% allowance will make a huge difference in payable taxes which can, in many cases, ensure wealth is passed down the bloodline providing obvious benefits over the years ahead. This change should also reduce the numbers of Canary Islands residents leaving and may even tempt the wealthy to reside in warmer climates!

Wills in place should be checked to see if the correct people are to benefit from your estate especially taking into consideration their qualifi-cation for this potential succe-ssion tax change.

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; an individual is advised to seek personalised advice.

To keep in touch with the latest developments in the offshore world, check out the latest news on our website www.blevinsfranks.com