Adam Neale (Columnist)
THOUGH Spain is a middle-income country by European standards, it has long been associated with high taxes.
Most home buyers are drawn here by the quality of life rather than the tax breaks. But now there is good news on the horizon and with the rise to power of a new coalition, the regional Andalucian Government seems intent to change taxation for the better.
In fact, in record time Andalucia has gone from being a place of crippling taxes to one that could even be described as something of a tax haven!
First came the virtual abolition of inheritance tax by a coalition of parties on the right that have made good on election promises to lower the fiscal burden that has crippled individuals and small-to-medium businesses for so long.
The change in direction is designed to make Andalucia 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 broom
The end of 40 consecutive years of Socialist rule in Andalucia means a sweeping reduction in taxes is in the offing – great news for homeowners, investors and business people.
Suddenly, fiscal matters in the region have gone from being a deterrent to an asset, with conditions that are actually more attractive than those on offer in Portugal, Britain or even Madrid.
Inheritance Tax
The first levy to be significantly slashed, since April this year spouses, children and parents have been enjoying a whopping 99% reduction in tax due on inheritances and gifts.
In fact, smaller amounts are effectively not taxed at all, and a property received in this way will now be subject to just 1% taxation, not 8-to-10% of its market value as was the case until now.
Income Tax
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, income tax rates 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% to 23%, which is favourable compared with other countries in Europe.
Wealth Tax
This tax was introduced in the early days of Spain’s new democracy as a way to raise much-needed public resources, and it has stubbornly hung around ever since.
Although there has been no official announcement yet, the plan is to eliminate it from January 1 2020. Whether or not this will happen regionally or nationwide remains to be seen. Watch this space!
