Joshua Parfitt
ANDALUCIA has achieved the impossible.
With three reforms in as many years Andalucia’s new government has slashed taxes down to some of the lowest levels in all of Spain.
After 37 years under socialist leadership – blighted by the €680 million ERE corruption scandal – conservative leader Juanma Moreno has helped Andalucia leap up all kinds of rankings.
This includes from 16 to position 7 in the annual Spanish Regional Tax Competitiveness report during Moreno’s tenure.
Andalucia now has the lowest inheritance tax (Impuesto de Sucesiones) rates in Spain, the third-lowest income tax (IRPF) rates and a slew of tax benefits that benefit house purchases, construction, young people, having children, large families, the disabled and victims of gender violence.
Flying in the face of previous approaches the tax cuts have boosted business.
Incentives have seen Andalucia flooded with self-employed workers to become the region with the most autonomos in Spain – 1 in 4 self-employed workers are now in Andalucia.
The Junta’s coffers have also grown €925 million above the start of the legislative session.
This was attributed to a growth of 15,000 people who last year registered to pay income tax (IRPF) in the region.
Andalucia has gone from being a ‘tax hell’ to a ‘motorway for investment’, according to Moreno’s councillor for public administration, Elias Bendodo.
Director for social economics, Susan Romero, said ‘impossible requirements’ had also been dismantled to bring quick support particularly to self-employed workers.
“I would go so far as to say that every single self-employed worker has gained some kind of financial benefit during the whole COVID-19 pandemic in Andalucia.”
Here’s a breakdown of how new laws in Andalucia affect wealth tax, inheritance tax, income tax and property transfer taxes.
Wealth Tax – Impuestos sobre el Patrimonio
Spain is the only country in the EU that applies a wealth tax.
The Impuesto sobre el Patrimonio affects anyone with assets over €700,000 (around 200,000 people in Spain) and these tax residents must declare any relevant properties, savings or current accounts, investments, life insurances, jewellery, vehicles, art, concessions or similar.
Andalucia’s wealth tax rates have been cut from January 2022 and operate on a sliding scale from a minimum of 0.2% to 2.5% (the top rate kicks in at over €11 million).
Above €700,000 the wealth tax rates are as follows:
| Tax base | Tax % |
|---|---|
| — | 0.20 |
| €167,150 | 0.30 |
| €334,250 | 0.50 |
| €668,500 | 0.90 |
| €1,337,000 | 1.30 |
| €2,674,000 | 1.70 |
| €5,348,000 | 2.10 |
| €10,696,000 | 2.50 |
Andalucia has also increased tax-free allowances to €1,250,000 and €1,500,000 for someone with a disability, depending on severity.
This puts Andalucia as among the 9 autonomous communities in Spain with the lowest wealth tax, according to property portal Idealista.
However, it hasn’t gone as far as Madrid, the only region to scrap the impuesto sobre el patrimonio completely.
Inheritance Tax & Gift Tax – Impuesto sobre Sucesiones y Donaciones
Andalucia has made a landmark reform by establishing a tax-free base of €1 million for inheritances per inheritor.
The tax on estates over €1 million has also been suppressed 99%.
This means tax residents in Andalucia will pay 1% on amounts over the €1 million threshold.
According to Spanish Property Insight, previously Andalucia’s inheritance taxes most affected a ‘hard-working middle class’ rather than the ‘rich’.
But its tax-friendly reforms even see it surpass Madrid to become the region with the lowest inheritance tax in all of Spain, equal with Cantabria and Galicia.
The tax-free allowance applies only to Grupo I and Grupo II inheritors, which means children, partners and parents.
Further tax incentives have been brought in for inheritances of houses, businesses and inheritance used to buy a primary house – especially for people with a disability.
Gift taxes have also been reduced with the starting tax rate lowered from 7.65% to 7% and the top rate from 36.5% to 26%.
Gift tax rates from January 2022 are now:
| FROM | TO | TAX RATE |
| — | €8,000 | 7% |
| €8,000 | €15,000 | 8% |
| €15,000 | €30,000 | 10% |
| €30,000 | €50,000 | 12% |
| €50,000 | €70,000 | 14% |
| €700,000 | €100,000 | 16% |
| €100,000 | €150,000 | 18% |
| €150,000 | €200,000 | 20% |
| €200,000 | €400,000 | 22% |
| €400,000 | €800,000 | 24% |
| €800,000 | — | 26% |
Income Tax – Impuesto Sobre la Renta de las Personas Fisicas (IRPF)
Andalucia’s tax reforms have also seen it drop to having the joint-third lowest income tax rates in Spain.
Only Madrid and Castilla y Leon have more competitive income tax rates, and Andalucia sits alongside Castilla La Mancha, Galicia and Murcia.
In practice it means that Andalucia reduced regional tax rates to the lowest possible (9.5%–22.5%) above the national tax rate.
The general income tax scale from January 2022 is now as follows:
| TAXABLE BASE FROM | TAXABLE BASE TO | TOTAL TAX RATE |
| — | €12,450 | 19% |
| €12,450 | €20,200 | 24% |
| €20,200 | €35,200 | 30% |
| €35,200 | €60,000 | 37% |
| €60,000 | €300,000 | 45% |
| €300,000 | — | 47% |
Andalucia has also introduced the possibility to reduce the taxable base through deductions.
Deductible costs include the purchase of a primary home, long-term rental costs, mortgage payments, birth of a child, cost of giving your child English classes, cost of paying for help at home (especially among elderly), for large families buying a house and for buying a newbuild home, for donating money to approved renewable energy projects and for anyone disabled or living with a disabled person.
Property Transfer Tax – Impuesto en Transmisiones Patrimoniales
Andalucia has reduced property transfer taxes (ITP) from as high as 9% down to 6% of the value of a primary home (tax capped at €150,000).
The rate reduces to 5% for young families or anyone with a disability buying a main home (tax capped at €150,000).
Flat property transfer taxes are otherwise 7%, for example when buying a second home, though there exist a long list of other incentives.
For example, previously when buying a house of €180,000 property tax would be €14,400 – from now the tax would by €12,600.
Further incentives exist for large families buying a primary home.
The cost of inscribing a house into Andalucia’s property registry has also reduced from 1.5% to 1.2% (Impuesto Sobre Actos Juridicos Documentados).
According to Autonomos y Emprendedores Andalucia is set to lose €329 million by reducing the property transfer tax, but would help 275,000 people while stimulating the housing market.
Juanma Moreno has made it clear he wants to make Andalucia the region with the lowest ‘tax pressure’ in Spain.
His campaign slogan was Andalucia baja impuestos or ‘Andalucia lowers taxes’.
The PP party’s spokesperson for Andalucia, Loles Lopez, said while Spanish president Pedro Sanchez raises taxes ‘Juanma Moreno cuts them down’.
“But we’ve cut taxes in a way that’s grown the economy, we are collecting more and making historic investments in public services.”
“Juanma Moreno cuts taxes thinking about the wellbeing of Andalucians.”
According to councillor for Hacienda, Juan Bravo, the team have achieved making ‘more people pay less’ than any other of Spain’s 17 autonomous regions.
The party have said they will not accept any bills from the PSOE that consider raising taxes.
