canary islands inheritance tax revenue plummet

Canary Islands inheritance tax benefit backfires as revenue plummets

Canary Islands inheritance tax revenue collapses after 99% rebate

The Canary Islands Government has suffered a triple failure with its inheritance tax rebate: renunciations to inheritances are rising, donations are falling, and revenue has crashed to levels not seen since 2020, the year of the pandemic, and 2019. The latest figures from the Canary Islands Institute of Statistics (ISTAC) confirm that the archipelago collected just €30.1 million from this levy in 2025, the lowest figure in five years.

In 2023, the last full year before the regional government – a coalition of the Canarian Coalition (CC) and the People’s Party (PP) – approved a 99% rebate on the tax, revenue stood at €82 million. The shortfall now exceeds €52 million.

Policy fails to curb renunciations or boost donations

The administration led by Fernando Clavijo (CC) intended to curb renunciations to inheritances across the Islands and stimulate donations by virtually abolishing the tax, in line with the fiscal policy applied by PP-governed autonomous communities. However, reality has proved stubborn: neither have renunciations fallen nor have donations risen. Quite the opposite.

Outright renunciations to inheritances reached 2,133 cases last year, more than in 2024 (2,123) and 2023 (2,045), according to data from the General Council of Notaries. Donations, far from increasing, fell to 9,448, compared with 9,785 in the previous financial year.

Initial optimism contradicted by longer-term trend

The Canary Islands Government initially celebrated the effects of the measure. In August 2024, less than a year after approving the rebate, Vice-President Manuel Domínguez (PP) claimed that renunciations to inheritances had fallen during the first quarter of that year and that donations had risen by 18% over the same period. “The tax rebate is boosting the Canarian economy and helping families maintain their wealth,” said Domínguez. “It was not appropriate to pass on a greater final burden to families, as the previous government did, for the transfer of assets that essentially represent a lifetime of savings and work,” he added.

In the long term, however, the picture is different. And the trend of the last decade had already signalled this: renunciations to inheritances have quadrupled in the Canary Islands over fifteen years. According to experts, the causes are more linked to debts associated with the legacy, personal or family conflicts, and the costs of accepting an inheritance, than to the tax burden.

Political backlash and proposed new tax

Yet the mantra that abolishing this tax would ease the inheritance bottleneck has continued to fly the flag for the right across Spain wherever it governs, applying tax cuts that punch holes of more than €2 billion a year in public coffers, according to a report by the Foundation for Applied Economics Studies (FEDEA). In the Canary Islands, losses between 2002 and 2022 have exceeded €350 million, according to that same analysis.

“We warned from day one: this measure had nothing to do with easing the situation of Canarian families, and everything to do with handing tax benefits to those who already have the most,” said Esther González, MP for Nueva Canarias. “Today the data confirms it: the tax was abolished and renunciations to inheritances have not fallen, but have risen,” she added.

On Friday, the Sumar parliamentary group tabled a bill in the Spanish Congress of Deputies to create a new tax on inheritances and donations exceeding €1 million, with the aim of complementing the existing succession and gift tax to combat “fiscal dumping between autonomous communities”. The initiative proposes a levy that guarantees a common floor of tax justice and seeks to combat practices in some communities, such as Madrid or the Canary Islands, where rebates that benefit large fortunes are applied, even with exemptions,” said Sumar’s economic spokesman in the Lower House, Carlos Martín.

Martín stressed that “Spain needs a tax system that does not look the other way when million-dollar estates are transferred”, adding that “equality of opportunity cannot depend on a postcode or the size of a family inheritance”. Even the OECD has made it clear: “Well-designed inheritance taxes can increase revenue and improve fairness, with lower efficiency and administrative costs than other alternatives,” it concluded in a comprehensive report published in 2021.

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