Andalusia’s new tax changes for 2022

Raymundo Larraín Nesbitt, January, 21. 2022

Lawyer Raymundo Larraín briefs us on the new tax changes in force in Andalusia as from 2022. The landmark tax reduction is so significant that it has ushered in a new era in wealth-planning.

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Article copyrighted © 2022. Plagiarism will be criminally prosecuted.

 Inset photo: La Alhambra, Granada

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
21st of January 2022

I’m going to cut to the chase on this one because, in all honesty, it’s growing old reporting every month on the continued changes in taxation in Andalusia (lowering them one month after another). I will be focusing mainly on the tax changes dealing with buying & selling property, inheritance, and income tax. But the scope of these changes run broader and deeper.

Any reader who follows us regulalry, will have noticed the large influx of tax articles featuring Andalusia over the last three years. This is because Andalusia’s new regional government is hell-bent on lowering taxes across the board and we are immersed in what can only be described as a ‘tax revolution’.

After almost 40 years of high taxes under the previous Administration, the newly-appointed Authorities have reduced taxes as much as is legally possible – within the constraints of devolved competencies – and we are all very grateful for it.

Changes below are a recap from law 5/2021, which came into force as from the 1st of January 2022. Please note I will not mention any previous tax changes (such as the key suppression of inheritance tax in Andalusia approved in 2019) only new tax changes.

Wealth Tax (Patrimonio)

  • Tax-free allowance increased to €1,250,000 per taxpayer with a physical disability equal to or greater than 33% (was €700,000).
  • Tax-free allowance increased to €1,500,000 per taxpayer with a physical disability equal to or greater than 65% (was €700,000).
  • Improved wealth tax sliding scale:
Tax base

 

Euros

Quote

 

Euros

Remainder

 

Euros

Tax rate

 

%

0 0 167.150,00 0,20
167.150,00 334,30 167.100,00 0,30
334.250,00 835,60 334.250,00 0,50
668.500,00 2.506,85 668.500,00 0,90
1.337.000,00 8.523,35 1.337.000,00 1,30
2.674.000,00 25.904,35 2.674.000,00 1,70
5.348.000,00 71.362,35 5.348.000,00 2,10
10.696.000,00 183.670,35 Onwards 2,50

Personal Income Tax (IRPF)

  • Tax allowance on buying main home 5% for young people (under 35 y.o.)
  • Tax allowance on long-term rental 15% (capped at €600/year).
  • Improved regional sliding scale: *
Tax base

 

Euros

Quote

 

Euros

Remainder

 

Euros

Tax rate

 

%

0,00 0,00 12.450,00 9,50
12.450,00 1.182,75 7.750,00 12,00
20.200,00 2.112,75 15.000,00 15,00
35.200,00 4.362,75 24.800,00 18,50
60.000,00 8.950,75 onwards 22,50

*works in tandem with national scale

Inheritance Tax (ISD)

  • 99% tax reduction on acquiring a main home for Groups I and II (irrespective of value).
  • 99% tax reduction on acquiring business/company for Groups I, II, and III.
  • Tax allowance for Group III increased to €10,000 (was €8,000)
  • Additional tax allowance of €250,000 for inheritors with disability greater than 33%
  • Additional tax allowance of €500,000 for inheritors with disability greater than 65%
  • Group III: top marginal rate is reduced to 45% (was 70%, top rate applies only in the most extreme cases, when millions are inherited).

As a gentle reminder:

Group I: Natural and adopted children under 21.

Group II: Natural and adopted children over 21, spouse, registered civil partnerships, parents, adoptive parents, grandparents, and great-grandparents.

Group III: Relatives in second and third degree: in-laws, brothers/sisters (siblings), nephews/nieces, aunts, and uncles.

Gift Tax (ISD)

  • 99% tax reduction on parents gifting money to children to buy a main home.
  • 99% tax reduction on parents gifting the main home to children.
  • 99% tax reduction on parents, or family members, gifting capital to set up a business (capped at €1,000,000).
  • 99% tax reduction on parents gifting money to children.

Property Transfer Tax (ITP)

  • 7% flat rate (irrespective of property value)
  • 5% for young families (under 35 y.o.) on buying a main home (capped at €150,000)
  • 6% on buying a main home (capped at €150,000)
  • 5% on buying a main home and with disability (capped at €250,000)
  • (long list of case-per-case reduced rates goes on and on) etc

Stamp Duty (AJD)

  • 1.2% flat rate on buying property (off-the-plan)
  • 1% on buying a main home (capped at €150,000)
  • 0.3% in rentals

Conclusion

These tax changes are as good as it gets, period.

Andalusia’s regional government continues with its unabated trend of lowering taxes across the board.

The tax improvements are so prominent, they have turned Andalusia into an ultra-low taxation area.  Andalusia and Madrid now have the lowest taxation in all of Spain.

The improvements foster foreign investments in Spain, and in particular in Andalusia.

These pivotal tax changes have not gone unnoticed by non-residents. In a 2021 survey, 12,000 expats from 174 countries, voted Malaga as the world’s second best place to work & live in.

If regional politicians continue doing such a stellar job, I won’t have anyone left to throw darts at, sigh.

 

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Originally published in Spanish Property Insight: Andalusia’s new tax changes for 2022

Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. No politician was harmed on writing this article. VOV.

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