20/09/22

EUROPE: Spain’s Andalusia to scrap wealth tax in bid to attract high earners.

As published on thelocal.es, Tuesday 20 September, 2022.

Andalusian regional president Juanma Moreno on Monday announced that wealthy residents and non-residents (second home-owners in the region) will no longer have to pay el impuesto de patrimonio, as wealth tax is called in Spanish.

From Wednesday September 21st 2022, Spanish nationals and foreigners who reside in the southern Spanish region or have a second home there, and whose worldwide assets are above €700,000, will receive a 100 percent tax deduction on said wealth tax.

In other words, they will not have to pay any tax on their assets as is the case in almost all of Spain’s regions.

The regional governments of the country’s 17 autonomous communities have the freedom to introduce tax deductions (bonificaciones) and asset exemptions as they see fit, but up to now the only region in which the wealth tax was non-existent was Madrid.

According to Moreno, Andalusia’s impuesto de patrimonio has been “an obstacle for investment” and he stressed that its cancellation won’t have a major impact overall in terms of tax collection in the region as it only represents 0.6 percent of Andalusia’s yearly tax revenue (€95 million).

Instead, he argued that it would attract approximately 7,000 new high-earning tax contributors to Andalusia.

“The aim of this is that certain high earners become residents in Andalusia and thus pay their taxes in the region, as well as making Andalusia the region with the least taxes together with Madrid,” the right-wing leader told journalists.

Around 20,000 people in Andalusia paid wealth tax in 2021.

Up until now, taxpayers in Andalusia with their primary residence in the region did not have to include this as an asset in the €700,000 wealth tax calculation if the property was valued below €300,000.

If their worldwide assets still surpassed €700,000, they would have to pay between 0.2 and 2.5 percent on any amount above the aforementioned threshold. For example, if a person’s worldwide assets added up to €750,000, they would pay 0.2 percent tax on €50,000.

The Andalusian leader also announced his government would ‘deflate’ its income tax rates through a process called deflactación del IRPF, which essentially sees this progressive tax factor in the effects of inflation on purchasing power.

Therefore, workers in the region with yearly earnings between €12,450 and €35,200 will pay less income tax.