Andalucia Effectively Abolishes Wealth Tax with Immediate Effect

17th November 2022

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Home to Marbella, Malaga and the Costa del Sol, the president of the Spanish region of Andalucia, Juanma Moreno, announced in September 2022 that he was scrapping the annual wealth tax with immediate effect as well as reducing personal income tax rates. The regional government has announced a 100% relief on wealth tax as part of their government’s efforts to make the region more attractive to the wealthy to stimulate more investments to recover from the effects of the harsh travel bans during the Covid-19 pandemic. 

Their decision to change the tax arguably makes it a tax haven and so arguably the second most attractive region of Spain to live in after Madrid, which has had similar tax reliefs for some time. Andalucia has been introducing attractive measures for a while, starting with their reduced stamp duty in 2021, and earlier in 2022 they reduced inheritance and gift taxes. 

Foreign Investment in Andalucia

Since the pandemic, the market share of foreign buyers is increasing with overseas buyers being responsible for 15.1% of all residential sales in the first quarter of 2022. There are now around 740,000 foreign residents in Andalucia. The government is hoping these tax incentives encourage potential foreign buyers to take advantage of opportunities such as the Golden Visa and the Highly Qualified Visa. 

Read our guide on the Spanish Golden Visa here.

Marbella, Andalucia’s most popular resort, has seen a 5% increase in prime prices in 2021. 

Filing Tax Returns for Wealth Tax in Andalucía 

As Spanish tax laws are set by the state, autonomous regions only have the right to adjust their tax rates for the region and so they can’t entirely abolish their wealth tax. They have instead approved a 100% tax relief for the wealth tax. 

Therefore, as per Spanish Tax Law, if the total value of a person’s assets exceeds €2,000,000 then you are obliged to file a tax return, despite the reduction being applied and you have zero tax liability.

Spanish Solidarity Tax Rates

Andalucia’s tax reform was swiftly followed by the Spanish state announcing a Solidarity Tax on any large fortunes across all of Spain. If approved, it will be implemented in the 2023-24 tax year and will affect anyone with a net wealth above €3,000,000. So those living in Andalucia are exempt from wealth tax but they would have to pay the new compulsory Solidarity Tax on large fortunes. 

However, this is still awaiting parliamentary approval and so is subject to change.

What about other regions? 

For any current residents of Andalucia or people wishing to relocate to the region, this is excellent and welcome news. However, it does open speculation as to where other regions with the same autonomy stand and if they will soon follow suit. 

It would be unsurprising to see other regions implement very similar reforms in their tax system if they too are wanting to attract new wealthy residents to invest in living there.

View all our Spanish Developments here. 

 

 

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