Gift Tax on the Canary Islands

Is Spanish or Canary Islands Gift Tax Law Applicable?

Across Spain uniform regulations concerning the taxation of gifts generally apply. However, such autonomous regions of Spain as the Canary Islands are entitled to enact their own regulations. The Canary Islands last exercised this right in 2015 by implementing special provisions for inheritance and gift tax.

Is There a Free Choice of Legislation?

When a gift is made, the donees, including those not residing in Spain, are sometimes entitled to decide in favour of the law of an autonomous community within the Canary Islands. This option will depend on the following criteria:

• If the donor was a resident of an autonomous community of Spain, the recipient residing in the EU or the EEA can choose the law of the autonomous community where the donor resided.
• If the donor did not reside in Spain but was a resident of another EU or EEA state, the recipient can choose the law of the autonomous community of Spain where the majority of the assets in question are located.
• If the donor has neither residence nor assets in Spain, the law of the autonomous community where the recipient resides will apply.

Does the Canary Islands Gift Tax Law Have any Distinctive Features?

As a general rule, the national rules apply to gift tax, yet there are some exceptions:

• The main residence can be transferred tax-free to a descendant with a degree of disability of at least 65%. The general government-mandated rules apply in this case.
• For acquisitions by way of a gift, a 99.9% deduction from the tax liability applies for taxpayers in tax categories I and II, provided that unlimited tax liability has been established.
• Group I: descendants and adopted children under 21 years of age
• Group II: descendants and adopted children aged 21 and older, spouses, and ascendants

How is the Spanish Increment Value Tax Calculated?

In addition to the gift tax, a municipal increment value tax is also due when assets are transferred. This tax is levied by the local municipality and is based on the official increase in the value of the land from the time of purchase to the time of transfer. The tax is calculated in accordance with the cadastral value of the land, as determined by the respective municipality. However, this tax will be levied for a maximum period of 20 years.

Is the National Capital Gains Tax also Applicable?

Gifting on the Canary Islands is also subject to the Spanish capital gains tax.

Is There Double Taxation in Germany?

If either the donor or the donee are Spanish taxpayers, German gift tax may be incurred in addition to Spanish gift tax. In such cases, double taxation can often be avoided or reduced by means of offsetting. Since there is no double taxation agreement between Germany and Spain for inheritance and gift tax, the offsetting will be based on the respective national provisions. Tax credit in Germany is only granted in the case of unlimited gift tax liability in Germany.

When is Gift Tax Due in Germany?

Gift tax in Germany is due within one month after the tax assessment notice has been issued.

CPA Nyikolaj Szmolenkov M.A.