Canarian Government approves tax increases to replace revenue lost in Madrid cuts

Update 30 May: The Canarian Government has now approved the law of “medidas Administrativas y Fiscales” with which they aim to lessen the shortfall in funding from Madrid, and which includes the rise of IGIC. The Government says that despite representations from, particularly Ashotel, there will be no changes in the provisions for the tourist sector. The measures will be put before the Canarian Parliament tomorrow to initiate the proceedings; these are expected to come into force on 1 July.

Original post 22 April: The Canarian Government has announced a range of measures to replace regional income lost in the cuts made by Madrid in the recent budget. Apart from organizational and personnel changes, some of which include the closure of Canarian Television’s Channel 2 and pay reductions for public employees, there are fiscal changes which will see taxes rise.

Three of those changes which will perhaps have the most direct impact are:

  • IGIC (essentially Canarian VAT) is to go up. This is a banded tax, and the changes will see the general 5% rate (that applied to property purchases from developers, for example) increased to 7%. The 2% rate will rise to 3%, and the 9% and 13% rates to 9.5% and 13.5%. Articles which are zero rated, generally those deemed “essentials”, will remain zero rated. IGIC discounts for fixed and mobile telephone lines will be withdrawn: these will now attract the 5% rate instead of being exempt.
  • Fuel taxes are also to rise, the first time in the Canaries since 2004. The increases will add an extra 5.5 cents per litre to unleaded 98; an additional 5 cents to unleaded 95; and put diesel up 10 cents. Diesel for commercial purposes will not be affected.
  • The 99.9% reduction in the inheritance tax rate for fiscal residents, only recently introduced, has been removed.

Original post 13 April: As I say on the taxes page HERE, the Canarian Government came into line a little time ago with other parts of Spain, and granted tax residents a 99.9% reduction in the tax rate for inheritances and gifts. Now, it looks as if residents might lose that advantage as a result of the economic crisis. The Canarian Government is currently discussing tax rises for the region and this is one being considered. There should be a decision next week about whether, and if so in what form, there will be a change.

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