The government of Spanish automonous community Andalucia has ditched its wealth tax for residents and second homeowners in the region.
Spanish nationals and foreigners within the Andalusian region will no longer pay tax on their worldwide assets of over €700,000 (£612,260, $694,110).
Andalucia is an autonomous community in Spain. The territory is divided into eight provinces: Almería, Cádiz, Córdoba, Granada, Huelva, Jaén, Málaga, and Seville, which is the capital city.
Juanma Moreno, the president of the Andalucían government, announced on 19 September 2022 that the region will abolish the wealth tax with immediate effect.
He also added the it is set to reduce personal income tax by 4.3% and abolish the water tax.
Accountancy firm Spence Clarke assessed the advantages of living in Andalucía, effective immediately, which include:
- Virtually nil inheritance and gift tax for close family;
- Maximum investment income tax of 26%. The rates are between 19% and 26% with the top rate only applying on income over €200,000;
- Capital gains tax rates of 19% – 26%, same as investment income;
- Buy to let residential letting net income taxed at an effective maximum tax rate of 20%;
- Letting income is calculated after deducting all related expenses, including loan interest;
- Private pensions are treated as investment income, taking income as the difference between sums invested and sums withdrawn. In some cases, tax can be as low as 2.5% of income drawn; and
- A full range of international tax treaties that ensure that double taxation almost never happens.
Alistair Spence Clarke, founding partner of Spence Clarke, said: “We know from discussions in the past with many, many, individuals wishing to move to Spain that they decided they couldn’t, often simply because of wealth tax. So, getting rid of this tax will be a true game changer, especially when combined with near exemption from inheritance tax and the relatively attractive income tax regimes.
“We also predict that most of those that decided on basing themselves in other countries like Portugal will now change their minds and move to Andalucía full time. Many people who opted for residence in Madrid will now rethink their situation and move to one of the best areas of Spain, with all the benefits of the sea, mountains and inland beauty of Andalucia.
“There is no doubt that Andalucia is now going to present real competition for Madrid. Areas like Cataluña, the Balearics, Valencia and Murcia need to seriously rethink their tax systems and stop scaring off wealthy foreigners and Spanish nationals, with punitive taxes that are principally motivated by left wing political dogma.”
Victor France, group chief executive of Abbey Wealth, said: “We speak with lots of potential expats who have found the wealth tax a barrier.
“A more attractive tax regime will certainly add to the appeal of the region and is a shrewd move by local government to encourage more high net worth individuals, investors and businesses to establish their permanent residence in the region.”
Blacktower Financial Management added: “This is being done in an attempt to attract high-level tax payers to the area and to encourage them to remain in Andalucia permanently in order to bring an increased level of investment into the area.
“This follows 20 of the top wealth tax payers leaving the region in 2022, taking with them €18m worth of tax. This is predicted to attract 7,000 new residents to the area, the economic benefits of which will exceed by far the 0.6% of regional income provided by wealth tax in previous years.”