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Proposals have been published for reforming the Spanish tax system to address “substantial tax disparities” across the country. 

The Spanish tax regime allows the 'Autonomous Communities' to adjust some rules and tax rates, for example income and wealth tax rates, and also the rates, allowances and reductions for succession and gift tax. As a result, there are substantial tax differences between regions, making some areas much more beneficial, tax wise, to live in than others.

The background

At a meeting of regional Prime Ministers with Spanish Prime Minister, Mariano Rajoy, in January this year, Andalucía requested a "tax harmonisation" of the Spanish tax system (especially for succession and gift tax and wealth tax) to avoid unfair competition and tax dumping between the different Spanish regions.

Other regions such as Comunidad Valenciana, Murcia, Castilla-La Mancha, Castilla y León, Galicia, Extremadura, Cantabria and Aragón supported Andalucía's petition that maximum and minimum rates for succession, gift and wealth taxes should be established to reduce regional differences. Madrid and Islas Baleares, however, rejected this proposal.

After the meeting, the central and regional Spanish governments appointed a committee of tax experts to look at the issue. In August, following six months of discussions, the committee published their tax harmonisation recommendations. One main focus is on limiting the freedom for regions to set their own rates for wealth, succession and gift taxes. 

While these recommendations are just at the proposal stage, here we consider the impact they could have on Spanish taxpayers. 

Succession and gift tax 

The recommendations include:

  • Establishing a fixed value that is exempt from succession and gift taxes.
  • Rates of 4%-5% for inheritances and lifetime gifts between close relatives and 10%-11% for others.
  • Simplifying calculations by removing the ‘multipliers’ that factor in the pre-existing wealth of beneficiaries and the relationship between the donor and the recipient. 
  • More flexibility for tax payment where the assets received are not easy to sell. 

 

Wealth tax 

Despite some speculation, there is no suggestion to abolish wealth tax, so it seems likely to stay for now. But the committee recommend that:

  • The same personal allowance applies across all Spanish regions. While no figure was specified, it is currently €700,000 in most regions. 
  • Regions can set their own rates and establish reliefs so that potentially no wealth tax could be payable at all – as is currently the case in Madrid. 


How will this affect you?

Note that the committee’s recommendations are not binding. For example, a previous tax experts committee was appointed in 2014 to help the Spanish government with the major 2015 tax reform. One of their reccommendations was that wealth tax should be abolished – this was not followed and wealth tax remains applicable in Spain.

If these recommendations do become law, it is likely that some people will see reduced succession and gift tax bills. With wealth tax, as no figures have been provided, it is hard to say exactly how the proposals would impact taxpayers. 

What happens next?

The central and regional governments now need to decide whether to implement any of the recommendations. Whatever happens, it is likely that it will be some time before any changes are made.

In the meantime, make sure your tax and estate planning is structured in the best way for your particular situation and goals. A specialist adviser can help you keep up with developments that may affect you. 

Contact us for a review of your tax and estate planning in Spain


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; an individual is advised to seek personalised advice.