Inheritance Tax Exposure as an Expat Canary Islands Resident

Spanish Succession and Gift Tax, like most taxes in Spain, depends on where you live. While Spanish residents who inherit funds or assets, or beneficiaries elsewhere receiving a Spanish inheritance, are exposed to SSGT, the autonomous communities have the right to set their own allowances and rules.

The Canary Islands are often regarded as a favourable tax jurisdiction compared to mainland Spain, and this is particularly true when it comes to regional inheritance tax. Reforms announced in 2023 have had a significant impact, with rebates of up to 99.9%, which may be a major factor in decisions about where to live.

In addition, the federal 95% allowance against main residences, capped at €122,606 per beneficiary and subject to a minimum retention period of ten years, increases to 99% with a more generous limit of €200,000 and a reduced five-year retention period.

The Inheritance Tax Regulations for Canary Islands Residents

While allowances in the Canaries are substantial, they depend on the relationship between the deceased and each inheritor. Canary Islands heirs who receive an inheritance from a close relative benefit from the 99.9% relief against gifts and inheritances, but also have separate allowances below which any inheritances are 100% tax free.

Recipients are divided into groups and then further categorised, which determines the inheritance tax-free thresholds that apply.

There are also special allowances for older beneficiaries and those with disabilities. Inheritors aged over 75 receive a €125,000 allowance, and those with disabilities are exempt up to €72,000 or €400,000 – the latter for heirs with more pronounced disabilities.

Understanding Contrasts Between Canary Islands Inheritance Tax Allowances and Rebates

Importantly, these deductions reduce the value of the inheritance that is exposed to inheritance tax, before a tax charge is calculated.

After this, the 99.9% rebate is applied to inheritances for beneficiaries in Groups I to III who effectively pay minimal tax, if any at all. Group IV beneficiaries, who are more distant relatives, do not have any familial allowance and are ineligible for the 99.9% rebate.

As an illustration, a person inheriting €1 million in Group II and entitled to a €40,400 allowance would technically be subject to inheritance tax on the €959,600 balance. However, the tax bill calculated would then be discounted by 99.9%.

Canary Islands Inheritance Tax Rates in 2025

Regardless of the allowances or rebates you believe you or your beneficiaries may be entitled to, it is essential to understand the actual tax charge. We have shared the existing rates below to assist with accurate budgeting.

Wealth Multipliers and Their Impacts on Inheritance Tax in the Canaries

A further calculation applies when inheritors have pre-existing wealth above a certain threshold. This doesn’t cancel out allowances or rebates, but means that the final tax charge calculated may then be multiplied depending on the individual’s assessed wealth.

These multipliers refer back to the groups we’ve explained above, which works as follows:

To illustrate how this works, we’ll imagine a beneficiary in Group III who has an inheritance tax charge of €1,000 but who also holds personal wealth of €1 million. Their inheritance tax would be subject to a multiplier of 1.6676, resulting in an amount payable of €1,668.

Further Inheritance Tax Considerations for Expats Living in the Canary Islands

Of course, these examples are simplified, and an inheritance can include diverse assets, such as properties, businesses, and insurance policies. The varied rules that apply include the following:

• Life insurance products are exempt from inheritance tax to a threshold of €23,150 if the recipient is a spouse, parent, or child.
• Family-owned businesses in the Canary Islands can be passed on to children and spouses with a 99% inheritance tax deduction, and a 95% exemption when enterprises are left to parents and certain other relatives, provided the business is maintained for five years and remains in the Canary Islands. Inherited businesses must also be eligible for the state wealth tax exemption to qualify for these exclusions.

Inherited assets that are passed to more than one beneficiary within a 10-year period are entitled to further reductions – such as when an asset has passed from one spouse to the other, and then onward to a child. Assets inherited within one year are discounted by 50%, within five years by 30% and between five and ten years by 10%.

Access Professional Inheritance and Succession Planning Support for Canary Islands Residents

As we’ve seen, the inheritance tax rules in the Canaries are generous, especially in comparison to the regulations in the UK and some other jurisdictions.

This demonstrates the appeal of retirement in the region, with the peace of mind that inheritances will be largely tax-free or carry very low tax exposure when left to immediate family members.

However, it remains important to understand the accurate tax treatment of your estate, to have a recognised will, and to plan ahead for forced heirship rules. It is also vital to ensure you have clarity about what will happen if your estate includes assets held across borders.

For further information and more personalised guidance about inheritance tax in the Canaries and elsewhere in Spain, you are welcome to contact Chase Buchanan Private Wealth Management at your convenience.

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*Information correct as at November 2025