Spain’s Andalucia is an area in which economic revival is well overdue. These changes will make it one of the most tax-efficient areas in Spain.
Let’s have a look at some of the benefits of living in Andalucia.
Andalucia is now a Tier 1 tax-friendly regime for inheritance tax, even surpassing Madrid in some aspects.
The pre-existing wealth rate nil-rate band is now €1,000,000 (per inheritor), meaning that estates equal or below €1,000,000 will now go untaxed. Moreover, anything over the million euro threshold is only subject to a 1% tax due on the amount thanks to the 99% tax exemption.
These reductions apply to children (including adopted ones), spouses and registered civil partnerships, parents and adopted parents, grandparents and great grandparents. However, stepchildren are not given the same exemption.
With Brexit coming up, the good news is that the exemptions apply regardless of where the inheritor lives, and moreover those who benefit from the inheritance tax can also benefit from the new gifts regime. This means that the transfer of real estate by deed of gift will only cost 1% instead of the previous 8%-10% tax that is charged for other types of transfers!
Andalucia’s tax rates are coming down, and will now be aligned with those present in Madrid, which are currently the lowest in Spain.
The reduction will be phased into action over the next 4 years and will consist of both lower taxes and tax bands. With these reductions, both low-income earners (less than €12,450) and high-income earners (exceeding €120,000) will benefit.
Expats living in Spain often have several sources of passive income. Here’s one of the most significant changes.
Residential letting of property in Spain is now more favorable thanks to the new changes in the UK system of taxing rental income. The rental income on Spanish property is subject to general rates of income but a deduction of 60% is given of the net income, not too exciting compared to the UK. However, in Spain, you’ll benefit as all costs are deductible, including loan interest costs.
Andalucia’s wealth tax was supposed to be reviewed in January of this year, with the promise of it being 100% removed. However, this has not yet happened, therefore the existing rules still apply, but may still possibly happen in the future.
Overall, the reduction or removal of any tax is always welcome by all, no matter how big or small, especially considering Spain’s progressive tax system.
Please bear in mind that the article we have written is just a quick summary of some of the points we found most interesting, and it should not be treated as a tax guide.
-The 3 Marbella team-