The Andalusian Government has unveiled a game-changing taxation U-turn, scrapping wealth tax for residents and second homeowners in the region, taking effect from today 21 September.
As Andalucía joins the ranks of the world’s most tax-friendly havens, Spanish nationals and foreigners with worldwide assets of €700,000 from Granada to Seville and across the Costa del Sol will no longer pay tax on their worldwide assets.
On September 21, 2022, the government dropped the ‘wealth tax’ for second homeowners in this region, propelling Andalucia to the number two spot with the lowest tax requirements in Spain, after Madrid. At Tailormade we believe that anyone considering a permanent move to Spain – or any other country – need to review their financial plans before they move ideally
The tax had applied to residents and non-residents with a net worth of €700,000 or more. It included the worldwide assets for Spanish nations, and Spanish assets only for non-residents.
Investment will be attracted to Spain’s Andalucia
The president of the Junta, Juanma Moreno, said the abolition will attract investment to the region, and he also announced a reduction in the rate of income tax and the cancellation of the water tax in 2023.
In a statement the Junta said “the decree law approved by Andalucia’s Governing Council contemplates the abolition in practice of the Wealth Tax by means of a 100% discount on the quota . As it is a ceded tax, only the central government has the power to abolish it.
“The objective of this measure is to attract new taxpayers to Andalusia and for this autonomous community to become the fiscal residence of a greater number of taxpayers. Many of them already live in Andalusia, but do not have their fiscal residence here. If they had it, they would be obliged to pay taxes on all their assets throughout the world.”
The statement on 19 September added: “The Wealth Tax represents barely 0.6% of the community’s tax revenue. The drop in revenue due to the abolition of the Wealth Tax can be alleviated with the increase in taxpayers foreseen in IRPF, as already happened when 100% of the Inheritance and Gift Tax quota was subsidized for relatives in groups I and II. Andalusia multiplied by four in personal income tax the amount that was not collected due to the abolition of this tax.
“Wealth Tax is considered an anomaly in advanced countries. In the scope of the OECD, in addition to Spain, it only survives in Norway and Switzerland.
“The fact that it does not exist in our immediate environment, including the community of Madrid, has caused the Wealth Tax to behave with a brake when potential taxpayers install their tax residence in Andalusia.”
Chris Lean, Investment Director, said: “Whilst our focus on investment performance which is more important often than a tax break it has to be acknowledged that expats focus often on tax first. In Spain, wealth tax is a barrier.Therefore, we can imagine, this new tax regime will add to the appeal of this Spanish region for higj net worth individual to establish their permanent residence”.
The government calculates that the small percentage of revenue received from the wealth tax will be compensated by the increased number of taxpayers who will be attracted to the area and will make their fiscal residence there.
The Andalucian government is following a successful past strategy, where they subsidized their Inheritance and Gift Tax for relatives of certain groups. The elimination of the tax increased the collected personal income tax by four.
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