From 1 January, the Canarian Government is likely to remove the 99.9% reduction on Inheritance Tax (Impuesto de Sucesiones y Donaciones) for Group 2 beneficiaries. Inheritance Tax is applied nationally, with autonomous regional governments able to offer reductions as they deem fit: here in the canaries the deduction has been in place since 2008 in the Canaries, but the new PSOE Government’s draft budget for 2020 includes a 12% increase in social spending and the removal of the Inheritance Tax discount is part of the way in which this will be financed – there will also be a rise in the top rate of income tax and an increase in IGIC from 6.5% to 7%.
The discount was actually removed in 2012 during the economic crisis before being reinstated in 2016, so this is not the first time this has happened. It is therefore likely that in coming years it will be re-established. From January, however, and at least for 2020, there is likely not to be a discount for Inheritance Tax purposes for heirs in Group 2.
The plans envisage instead a variable progressive relief depending on the inheritance’s value, with bequests under €300,000 exempt while those between €300,000 and €350,000 receive 90% tax relief. The relief will be reduced by 10% for each further €100,000 of the inheritance until there is no reduction at all for inheritances over €1.1 million.
Please note that this is only envisaged as applying to Group 2 heirs, with Group 1 inheritances still subject to the 99.9% discount. It remains to be clarified whether these new rules, if implemented in the final budget, will also apply to gifts. There is further information HERE on rates and how to work out a computation of liability, though as ever, qualified professional assistance should always be engaged for tax matters.