Inheritance Tax on the Canary Islands
Tenerife – Fuerteventura – Gran Canaria – Lanzarote – La Palma – La Gomera – El Hierro
In the following, an overview of the main aspects of inheritance tax on the Canary Islands is provided. Should you have any specific questions or be dealing with complex situations, we recommend that you seek legal advice to ensure that all the necessary steps are taken in a proper and timely manner.
What you Need to Bear in Mind with Regard to Inheritance Tax
Is Spanish or Canary Islands Inheritance Tax Law Applicable?
Across Spain uniform regulations concerning inheritance tax generally apply. However, the autonomous regions of Spain have the right to deviate from these regulations and enact their own provisions. The Canary Islands last exercised this right in November 2015 by implementing special provisions for inheritance tax.
Is There a Free Choice of Legislation?
Before 2015, respective regional law was only applicable if the inheritance case in question had a specific connection to the autonomous region, which was not the case for many Germans. As of 1 January 2015, beneficiaries, whether or not they have any connection to the Canary Islands, can, in principle, choose the law of the Canary Islands, which allows them to benefit from more favourable regulations.
How are Tax Allowances Determined?
Inheritance tax allowance depends on the heir’s degree of kinship in relation to the deceased. These allowances are as follows:
- for children up to 21 years old: between €40,400 and €138,500
- for children over 21 years old: €23,125
- for grandchildren and great-grandchildren: €18,500
- for spouses: €40,400
- for siblings, nieces, and nephews: €9,300
Equal Treatment of Registered Civil Partnerships
Registered civil partners are treated the same way as spouses and are entitled to the same tax advantages.
Is There a Tax Exemption for Family Homes?
The main residence of the deceased can be deducted from the taxable base at 99% of its value up to a maximum amount of €200,000. The conditions for this are as follows:
- The heir is either a direct relative of the deceased, or an elderly collateral relative (over 65 years old) who had lived with the deceased for at least two years.
- The heir must retain the property for at least five years.
This applies to all tax categories.
Tax Liability Deductions
Depending on the tax year and tax category, the Canary Islands grant various tax liability deductions. For inheritance cases between the years 2016 and 2018, a 99.9% reduction was introduced for taxpayers in Categories I and II. From 2019 onwards, this deduction shall also apply to Category III. Since 2020, the 99.9% deduction has been scaled as follows:
- Tax Category I: regardless of tax liability
- Tax Categories II and III: up to €55,000. Amounts above this sum are discounted on a graduated basis.
Latest Regulations Effective as of 6 September 2023
As of 6 September 2023, the rules for inheritance and gift tax on the Canary Islands have been further revised. For acquisitions from this date onwards, a deduction of 99.9 % of the tax liability will be granted to taxpayers in tax categories I, II and III.
Is it Necessary to Submit a German Tax Declaration?
If there are links to Germany, German gift tax may also be incurred. According to Section 30 of the Inheritance Tax and Gift Tax Act, the donee must report any gift to the tax office responsible for administering the inheritance tax within three months of becoming aware of the acquisition. The tax office may demand that each party involved in the gift-giving transaction file a tax return within a specified period. This period may be extended upon request.
When is Spanish Inheritance Tax Due?
In Spain, inheritance tax must be paid no later than six months after the death of the testator.
When is Gift Tax Due in Germany?
Gift tax in Germany is due within one month after the tax assessment notice has been issued.
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CPA Nyikolaj Szmolenkov M.A.
Your tax law specialist
Tel.: +49 (0)172 / 712 0558
Settling an estate in the Canary Islands can be complex and demanding. There are a number of legal and administrative hurdles that need to be overcome. We can help you.
Our direct contact person for you in Tenerife and Malaga is Mrs Svetlana Evgrafova.
She speaks German, English, Spanish and Russian and can also support you in emergencies.
Tel.: +49 (0)172 / 923 1838
Overview of topics Canary Islands
Inheritance law
Find out now about the most important questions regarding inheritance law in the Canary Islands: Who is entitled to inherit in the Canary Islands if the deceased had neither children nor a spouse? Is a German will valid in the Canary Islands?
Estate settlement
Find out now about the most important questions regarding the settlement of estates in the Canary Islands: How is the inheritance accepted? Does a Spanish tax declaration have to be submitted when the heirs are entered in the land register?
Inheritance tax
Find out now about the most important questions regarding inheritance tax in the Canary Islands: How are the tax-free amounts determined? Is there a tax exemption for the family home?
Gift tax
Find out now about the most important questions regarding gift tax in the Canary Islands: Are there any special features of Canary Islands gift tax law? Is there double taxation in Germany?
Property law
Find out now about the most important questions regarding property law in the Canary Islands: How does the purchase of a property work in principle? How high is the property transfer tax in the Canary Islands?
Inheriting property
Find out now about the most important questions regarding property inheritance in the Canary Islands: Which law applies to inheritance cases in the Canary Islands? When and how is the property transferred to the heirs?
Your tax law specialist
CPA Nyikolaj Szmolenkov M.A.
- Tax consultant
- Company valuations
- Preparation of inheritance and gift tax returns
- Cooperation partners of the firm
- Registered office: Augsburg
- Location: Balearic and Canary Islands
- Tel.: +49 (0)172 / 712 0558
