Written by Canarian Weekly Business
THE start of a new year is also the start of a new tax year in Spain, so what tax changes do we have in 2019?
While Spain’s central government is debating the state budget for 2019, the local Canary Islands government has approved its budget for the year. And we have some good news in relation to income tax, and succession and gift tax.
Two, regional, income-tax brackets have been reduced, from 9.5% to 9%, for income up to €12,450, and from 12% to 11.5%, for income between €12,450 and €17,707.
These are just the regional half of the income tax, because they need to be added to the state rates, to reach the total rates we will pay in the Canary Islands for 2019 income. In 2018, the lowest two state rates were 9.5% and 12%.
The rest of the regional brackets remain the same (up to 24%, this top rate applying to income over €90,000), and they all need to be added to the state rates to arrive at the final, applicable, income-tax rates for residents of the Canary Isles. The top state rate was 22.5% in 2018.
Succession and gift tax
In 2016, a 99.9% reduction for succession and gift tax was introduced for group I and II beneficiaries. This covers spouses, children and other descendants (grandchildren, etc), as well as parents and other ascendants, such as grandparents.
For these groups, it applies to both inheritances and lifetime gifts. But, for gifts, the donation has to be completed, using a public deed.
Now, though, from 1st January 2019, this 99.9% relief has been extended to Group III beneficiaries. Group III includes brothers and sisters, nephews and nieces, cousins, and aunts and uncles. It can also include some in-laws and step-children, in certain circumstances, but this has to be reviewed on a case-by-case basis.
Note that for Group III beneficiaries, the relief only applies to inheritances; it does not apply to lifetime gifts.
The special Canary Islands VAT, known as IGIC, has been reduced from 7% to 6.5%.
Tax residency inspections
It has always been important to understand the different Spanish criteria, which make you resident here for tax purposes, and follow the rules correctly.
We have been informed by different tax lawyers in Spain that they have recently seen an increase of inspections on tax residency, particularly for wealthier people.
In some cases, the individuals were spending very few days in Spain, but the Spanish Tax Office argues that Spain is its centre of economic interests, which would make them Spanish tax residents.
So, it is worth remembering that tax residence in Spain is not just about counting days. Other factors may have a substantial relevance, depending on the circumstances, even if you spend much fewer than 183 days a year here.
Blevins Franks have an in-depth knowledge of the Spanish tax rules, and how they interact with those in the UK.
Please do not hesitate to contact us at www.blevinsfranks.com if you wish to clarify your tax position in Spain, or discuss effective tax-planning solutions for both Spain and the UK.
The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices, which are subject to change. Tax information has been summarised, and an individual is advised to seek personalised advice.
Keep up to date on the financial issues which may affect you on the Blevins Franks news page at www.blevinsfranks.com