Good news: Andalucía significantly lowers taxes!
Though it is a middle-income country by European standards, Spain has for a long time been associated with high tax levels. Having travelled and bought here in spite of this, drawn by the quality of life rather than the tax breaks, now there is good news on the horizon—with the ascension to power of a new coalition, the regional Andalusian government seems intent to change taxation for the better.
First came the virtual abolition of inheritance tax by a coalition of parties on the right who have made good on election promises to lower the fiscal burden that had been crippling individuals and small to medium businesses for so long. The change in direction is designed to make Andalucía more attractive to investors both national and international, as well as to give businesses and entrepreneurs a much-needed respite from the traditionally heavy tax yoke.
A new tax regime for Andalucía
An end has therefore come to 40 consecutive years of socialist rule in Andalucía, and quite apart from political preferences this means a significant reduction in taxes is in the offing – great news for homeowners, investors and businesspeople in the region. Suddenly, fiscal matters in this region have gone from being a deterrent to actually being more attractive than the conditions on offer in Portugal, the UK or the Madrid region.
The first levy to be reduced greatly is Inheritance Tax, which since April this year sees spouses, children and parents enjoy a 99% reduction in the actual amount of tax to be paid on inheritance and gifts. In fact, smaller amounts are effectively not taxed at all, and a property received in this way will now be subject to 1% taxation, not 8%-10% of its market value, as was the case until the change.
Income Tax, too, is set to be effectively lowered thanks to a revised income bracketing, with the qualification of ‘low’ incomes raised so that they benefit from lower rates. This means that across the salary brackets the income tax rate will be reduced gradually over the coming four years to bring them in line with the current levels in Madrid.
Income from investments
Income accrued from private pension plans, investments, capital gains and property rentals affects foreign residents and locals alike, and in this regard Spain is already attractive and there is no need for much change. Currently, top rates for these categories of income range between 19%-23%, which is favourable when compared with other countries in Europe.
This type of tax was introduced in the early days of Spain’s new democracy as a way to raise much-needed public resources, and it has hung around ever since. No official notification has been made yet in relation to it, but the plan is for it to be eliminated on a national level as of 1 January 2020. Whether or not this will actually happen regionally or in Spain as a whole remains to be seen, but in record time Andalucía has gone from being a high-tax area to one that could even be described as something of a tax haven!
By Adam Neale | Property News | May 8th, 2019