Andalusia to abolish inheritance tax in 2019

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Blog post copyrighted © 2019. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Lawyer – Abogado
29th of January 2019

Well, I’ll eat my hat. Politicians doing their job, whatever next?

Andalusia’s centre left wing party was ousted from power last December after 37 years in control. With the turn of tide, the new centre-right wing ruling coalition (including a far right-wing party) have agreed in Seville this week to abolish inheritance tax in Andalusia. It won’t actually be abolished – excuse the catchy title – it will be suppressed by 99% on all estates over €1 mn. This translates into only HNWI’s paying a paltry amount on inheriting; the rest of us get to walk away scot-free.

This landmark tax reform is without a shadow of a doubt one of the most important tax milestones in the autonomous region of Andalusia over the last 4 decades (since its inception in 1982). It is the result of a long-winded campaign led by political activists, such as the group ‘Stop Sucesiones’ and other right-wing political groups.

The change translates into 99.99% of inheritors in Andalusia will no longer need to pay inheritance tax on inheriting assets from their parents or spouse, which is a welcome respite. Despite what you may hear, IHT never taxed the ‘rich’ but the hard-working middle class. These fiscal changes are in addition to those approved in 2016 and in 2017 which I had already profusely covered in previous articles and blog posts (see below for related taxation articles).

This bold move allows Andalusia to jump onto the front of the band wagon of other autonomous regions in Spain which are applying reductions on IHT to such an extent which in practice translates to almost suppressing it i.e. Madrid, Basque Country, La Rioja, Navarre, Catalonia, Valencia, Balearic, Canary Islands and now Andalusia too, leading the pack.

Andalusia will officially become in 2019 a tier 1 tax-friendly region for inheritance tax, even surpassing Madrid in some respects. As I had previously pointed out in other tax articles of mine relating to Spanish Inheritance Tax, there was an ongoing movement throughout Spain over the last decade to suppress or greatly reduce inheritance tax to the point of negating it. This trend has finally coalesced into this new regulation.

In a nutshell, inheritance tax will be as follows in Andalusia:

Requirements to benefit from this tax allowance

  • Inheritor/estate beneficiary/taxpayer needs to be EEA/EU-resident.

 Inheritance Tax in Andalusia

  • Pre-existing wealth nil-rate band raised to €1,000,000 (per inheritor).
  • Estates equal to or below €1,000,000 will go untaxed (per inheritor).
  • Estates over €1,000,000 will benefit from a 99% exemption (per inheritor). Meaning you only pay 1% over what exceeds the 1mn threshold.

 

Who benefits?

  • Group I: natural and adopted children under 21.
  • Group II: natural and adopted children over 21, spouse, registered civil partnerships, parents, adoptive parents, grandparents and great-grandparents.

Conclusion

This is as positive as news get. Inheritance taxation had traditionally been Andalusia’s Achille’s heel. It turns out it will now become one of its main selling points! Go figure.

I really do not need to explain how positive this tax news is for Andalusia and the broader market. I never thought I would live to see the day Andalusia led the abolition of IHT in Spain, even surpassing liberal Madrid, but there you go. Times change and the world moves on.

Holding structures incorporated with the sole purpose to mitigate or negate IHT liability will now become redundant in Andalusia following the approval of this change in regulation. This law is expected to be approved over the course of 2019.

For once, I’m happy to commend politicians on adopting a sensible tax measure that benefits legions and contributes towards dynamising the Andalusian economy. Kudos to them!

I don’t want to push my luck, but now that politicians are on a warm fuzzy mood, can we ask them to show some love and adopt a similar programme to Portugal’s Non-Habitual Resident tax scheme (NHR) to attract non-resident investments, particularly British? Pretty please with cherries on top?

“It’s the economy, stupid.” – James Carville

James Carville (1944). He coined this political slogan as campaign strategist of Bill Clinton’s successful 1992 presidential bid against sitting president George H. W. Bush.

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About Raymundo Larraín Nesbitt

After completing his dual law degree in Madrid (ICADE) in 2003 Raymundo went on to work for prestigious Spanish and English law firms in Spain before moving to the UK for several years to work for a British multinational. He is a prolific writer of legal & financial articles in English, with well over 140 articles published and widely used in the Spanish real estate sector. Raymundo now runs his own law practice in Marbella, where he advises local and foreign clients on all legal matters with a focus on conveyancing and non-resident taxation. He is regularly quoted by the international press as a reliable source in his field of expertise.

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