Inheritance tax is back
In previous columns, I have spoken about the Spanish Inheritance Tax and its exemption within the Canary Island Autonomous Community (from 2008) for residents.
The Canarian Government has now reinstated the Inheritance Tax and Gift Tax, so it is a good time to remind you just what these taxes are, and how they are regulated.
Inheritance tax is the tax payable on any increase of wealth, obtained by death.
Gift tax is charged on increased wealth, caused by virtue of a gift while the donor is still living.
The inheritance and gift taxes are levied on the following:
Acquisition of assets and rights by way of succession. Foreign individuals must pay inheritance tax inSpain only for the Spanish estate.
Obtaining assets and rights by way of gift or any other gratuitous transfer inter vivos (during granter’s lifetime).
Acquisition of revenue from a life insurance policy, where the contractor party is a different person from the beneficiary.
Each beneficiary must, individually, pay the tax and must be paid before the beneficiary can sell the descendant’s assets. If the inheritor wants to sell all the assets of the deceased, the inheritor must pay first the inheritance tax. In addition, the Grantees (the ones who acquired an asset by gift) and the beneficiaries of an insurance policy, also have to pay this tax.
It is complicated to calculate the rate of the tax because different percentages are charged according to an increasing scale, and other circumstances are taken into account. In fact, all Autonomous Communities have their own rules (different regimes, exemptions, etc).
Inheritance and gift tax is progressive, the rates applicable being determined on the following circumstances:
*The value transferred to the beneficiaries
*The existing wealth
*The beneficiary’s relationship with the deceased
The applicable deductions for the relatives are divided into three Groups:
Group I: Descendants and adopted individuals aged under 21
Group II: For descendants, adopted individuals over 21, spouses and ascendants.
Group III: For second or third-degree collateral family, descendants by affinity or ascendants
Class IV: For collateral family of fourth degree and other transferees, no reductions shall be applied.
A progressive rate is applicable to the net taxable amount to arrive at the gross tax payable. The final amount is the final tax payable (which is called cuota tributaria, or deuda tributaria). It is suggested that all legal matters referred to inheritance and gift tax be sent to professionals for advice, guidance and execution.
Group I enjoys more deductions than Group II, which, at the same time, enjoys more deductions than Group III, and so on.
The return of Inheritance Tax and Gift Tax will not affect non-residents as they have been paying such taxes in spite of the exemption (available for residents).
There are different legal ways to reduce the consequences of high inheritance taxes.
This will be discussed in future columns.
I take this opportunity to thank all readers who have send emails with queries, or who have just written to say hello.
Mariano Zunino Siri is a lawyer registered in Tenerife Bar Association since 1991. Office in Los Cristianos at Edificio Valdes Center Torre “A”, oficina 1, piso 2º. Phone: 922 79 44 12.
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