New tax rules in the southern Spanish region reduce income tax rates and cut succession tax bills to just 1% for spouses and children. 

It is not often that we have good tax news, but Andalucía residents will welcome the new regional tax rules. It took a few months for the regional government to confirm the new tax law, but it was worth the wait.  

The Decree-Law was finally approved on 9th April, with one clear objective: to position Andalucía as one of the lowest taxed regions in Spain to help revitalise the regional economy. 

The three key changes which came into force on 11th April 2019 are:

  • Lower income tax rate
  • A 99% succession and gift tax relief for close family member
  • Some reduced rates for transfer tax and stamp duty 

Reduced income tax rates

The proposed reductions in the regional income tax rates have gone ahead. However, since the overall tax reform will cost around €10.7 million, this reduction will be introduced progressively between 2019 and 2023 to maintain the financial sustainability of the new laws.

For 2019 income, the regional half of income tax rates will range from 9.75% for income up to €12,450, to 24.9% for income over €120,000.  

So the total tax rates for 2019, when the state half is added (as they currently stand, they may change when a 2019 budget is confirmed), start at 19.25% and rise progressively to 47.4%. 

The local rates then reduce again in 2020, 2021, 2022 and 2023. 

For 2023 income, the lowest regional rate will be 9.5% for income up to €12,450.  The top rate, for income over €60,000, will be 22.5%.

So once the state income tax rates (as they currently stand, but these may change for future years) are added, the rates for taxpayers in Andalucía will very likely range from 19% to 45% in 2023.

Succession tax (inheritances)

Last year saw the introduction of a new €1 million succession tax reduction for Group I and II beneficiaries, where their pre-existing wealth is no more than €1 million.

This remains in place, but now in addition to this and the other available reductions (main home reduction, personal reduction, etc.), a 99% tax relief is available for spouses, descendants and ascendants, after the tax rates and multipliers are applied for inheritances (i.e. on death). 

This means that effectively, spouses and children will only pay 1% of the succession tax bill due in Andalucía. 

Gift tax (lifetime gifts)

A 99% tax relief is now also available for Groups I and II beneficiaries, after the tax rates and multipliers are applied for lifetime gifts. 

This is completely new as there were no previous relevant gift tax reductions or tax reliefs available in this region in the past. 

Note that in order to apply this relief, the gift must be recorded in a public deed (escritura pública), so a Spanish notary will have to be involved in the transaction.  Also, if the gift is cash or money from bank accounts, savings accounts etc., the public deed will need to include a proven source of funds. 

Capital gains tax may also be payable by the donor (on top of the gift tax paid by the beneficiary) when making a lifetime gift, but this does not apply for cash gifts.

Transfer tax and stamp duty

Andalucía has also introduced some reduced rates for Transfer Tax (Transmisiones Patrimoniales Onerosas – TPO) and Stamp Duty (Actos Jurídicos Documentados – AJD), particularly for taxpayers under 35; taxpayers with disabilities, and large families (with three or more minor dependent children). 

For example, there is a new reduced transfer tax rate of 3.5%, and a new reduced stamp duty rate of 0.3%, for property buyers aged under 35, where the property will be their main home and it is valued at €130,000 or less. 

Tax planning review

These reforms are good news for taxpayers in Andalucía. There is not a significant difference in income tax rates, but lower rates are always very welcome.  You may be paying more tax than necessary, particularly on your investment capital, so take advice to establish how you can take advantage of compliant tax planning opportunities available in Spain.

The succession and gift tax reform will help with your estate planning arrangements, helping ensure most of your wealth is passed to your loved ones. A specialist adviser can guide you through the reforms and help you set up an estate plan to fulfil your wishes for your heirs, with as little tax as possible.   

Arrange a consultation with a local adviser

The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.