Canary Islands Inheritance Tax. Reductions and Bonifications

Introduction

The Inheritance and Gift Tax is a state tax. It is regulated by Law 29/1987, of December 18, on the Tax on Inheritance and Gift Taxes and the Regulation that develops it is Royal Decree 1629/1991, of November 8.  But, this national tax can be adapted and improved by regions. So, for Canary Islands region, the Inheritance and Donation Tax is regulated and adapted by the regional law Decreto-ley 5/2023, de 4 de septiembre, por el que se modifican las bonificaciones en la cuota tributaria del Impuesto sobre sucesiones y donaciones.

In this section we will detail exclusively  reductions, tax rate and bonus  on the Inheriance and Donation Canary Islands  tax. For other aspects as Process of Inheritance, Executing a foreign Will etc, please, visit our Inheritance Process section, where all aspects and procedures may be reproduced in inheritance process independently of the specific executed region. 

Successions

Reductions in the tax base

Reduction for kinship

In acquisitions mortis causa, the corresponding reduction is applied, among the following, due to the degree of kinship between the purchaser and the deceased:

a) Group I, acquisitions by descendants and adoptees under twenty-one years of age:

– Children under ten years of age: 100 per cent of the taxable base, without the reduction exceeding 138,650 euros.

– Children under fifteen years of age and equal and over ten years of age: 100 percent of the taxable base, without the reduction being able to exceed 92,150 euros.

– Minors under eighteen years of age and equal and over fifteen years of age: 100 percent of the taxable base, without the reduction exceeding 57,650 euros.

– Minors under twenty-one and equal and over eighteen years of age: 100 percent of the taxable base, without the reduction being able to exceed 40,400 euros.

b) Group II, acquisitions by descendants and adoptees of twenty-one years of age or older, spouses, ascendants and adoptive parents:

– Spouse: 40,400 euros

– Children or adopted: 23,125 euros

– Other descendants: 18,500 euros

– Ascendants or adoptive parents: 18,500 euros

1. c) Group III, acquisitions by second and third degree collaterals and by ascendants and descendants by affinity: 9,300 euros.
2. d) Group IV, acquisitions by collateral relatives of the fourth degree or of more distant and strange degrees: there will be no room for any reduction on grounds of kinship.

Disability Reduction

In mortis causa acquisitions by people with physical, mental or sensory disabilities, with a degree of disability equal to or greater than 33 percent and less than 65 percent, a reduction of 72,000 euros is applied.

If the degree of disability is equal to or greater than 65 percent, a reduction of 400,000 euros will be applied.

For the purposes of this reduction, the degrees of disability are those established by the general regulations of the Social Security.

The reduction established by this article is compatible with the reduction that may correspond to the reason of kinship.

Age reduction

In the case of mortis causa acquisitions by persons aged seventy-five or over, a reduction of 125,000 euros is applied.

This reduction is incompatible with the disability reduction, and compatible with the other reductions.

Life Insurance Reduction

In mortis causa acquisitions, a reduction of 100 per cent shall be applied to the amounts received by the beneficiaries of life insurance contracts, when their relationship with the deceased contracting party is that of spouse, ascendant, descendant, adoptive parent or adoptee, with a limit of 23,150 euros.

In the case of group insurance or insurance taken out by companies in favour of their employees, the degree of kinship between the deceased insured and the beneficiary will be applied.

The reduction for life insurance shall be the only one per taxable person, regardless of the number of life insurance contracts of which the beneficiary may be.

In the event that they are entitled to the system of rebates and reductions established by the fourth transitional provision of Law 29/1987, of 18 December, on Inheritance and Gift Tax, the taxpayer may choose between applying said regime or the reduction established in this article.

In the case of life insurance policies arising from acts of terrorism, as well as from services provided in international humanitarian or peace missions of a public nature, the reduction established in this article shall apply, and shall not be subject to any quantitative limit, and shall be extended to all possible beneficiaries.

The reduction established in this article is compatible with the reduction that may be applicable for reasons of kinship, disability and age.

Other reductions:

– Reduction for the acquisition of a sole proprietorship or a professional business

– Reduction for the acquisition of shares in entities

– Reduction for the acquisition of the deceased’s main residence

– Reduction for the acquisition of assets of members of the Historical or Cultural heritage

– Reduction for ten-year overtaxation

– Age reduction.

– Reduction for the acquisition of Natural Heritage assets

Tax Rate

Bonifications on the tax rate

Successions

Bonus on the quota for kinship Groups I and II

Taxpayers included in groups I, II and III of those provided for in Article 20.2.a) of Law 29/1987, of 18 December, on Inheritance and Gift Tax, will apply a rebate of 99.9 per cent of the tax liability derived from mortis causa acquisitions and amounts received by the beneficiaries of life insurance that are accumulated to the rest of the assets and rights that make up the portion of the beneficiary”.

Donations

Bonus on the quota for kinship Groups I and II

Taxpayers included in groups I and II of those provided for in Article 20.2.a) of Law 29/1987, of 18 December, on Inheritance and Gift Tax, will apply a rebate of 99.9 per cent of the tax liability derived from Donation acquisitions, provided that the donation is formalised in a public document. This formalisation will not be necessary in the case of insurance contracts that must be taxed as a donation. This rebate shall not be applicable to those Donation acquisitions that in the previous 3 years have benefited from the rebate provided for in this article, unless, within that period, their acquisition takes place “mortis causa”.”