Lawyer Raymundo Larraín briefs us on the new tax changes in force in Andalusia as from 2022. The landmark tax reduction is so significant that it has ushered in a new era in wealth-planning.
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Inset photo: La Alhambra, Granada
By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
21st of January 2022
I’m going to cut to the chase on this one because, in all honesty, it’s growing old reporting every month on the continued changes in taxation in Andalusia (lowering them one month after another). I will be focusing mainly on the tax changes dealing with buying & selling property, inheritance, and income tax. But the scope of these changes run broader and deeper.
Any reader who follows SPI regularly will have noticed the large influx of tax articles featuring Andalusia over the last three years. This is because Andalusia’s new regional government is hell-bent on lowering taxes across the board and we are immersed in what can only be described as a ‘tax revolution’.
After almost 40 years of high taxes under the previous Administration, the newly-appointed Authorities have reduced taxes as much as is legally possible – within the constraints of devolved competencies – and we are all very grateful for it.
Changes below are a recap from law 5/2021, which came into force as from the 1st of January 2022. Please note I will not mention any previous tax changes (such as the key suppression of inheritance tax in Andalusia approved in 2019) only new tax changes.
Wealth Tax (Patrimonio)
- Tax-free allowance increased to €1,250,000 per taxpayer with a physical disability equal to or greater than 33% (was €700,000).
- Tax-free allowance increased to €1,500,000 per taxpayer with a physical disability equal to or greater than 65% (was €700,000).
- Improved wealth tax sliding scale:
Personal Income Tax (IRPF)
- Tax allowance on buying main home 5% for young people (under 35 y.o.)
- Tax allowance on long-term rental 15% (capped at €600/year).
- Improved regional sliding scale: *
*works in tandem with national scale
Inheritance Tax (ISD)
- 99% tax reduction on acquiring a main home for Groups I and II (irrespective of value).
- 99% tax reduction on acquiring business/company for Groups I, II, and III.
- Tax allowance for Group III increased to €10,000 (was €8,000)
- Additional tax allowance of €250,000 for inheritors with disability greater than 33%
- Additional tax allowance of €500,000 for inheritors with disability greater than 65%
- Group III: top marginal rate is reduced to 45% (was 70%, top rate applies only in the most extreme cases, when millions are inherited).
As a gentle reminder:
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.
Group III: Relatives in second and third degree: in-laws, brothers/sisters (siblings), nephews/nieces, aunts, and uncles.
Gift Tax (ISD)
- 99% tax reduction on parents gifting money to children to buy a main home.
- 99% tax reduction on parents gifting the main home to children.
- 99% tax reduction on parents, or family members, gifting capital to set up a business (capped at €1,000,000).
- 99% tax reduction on parents gifting money to children.
Property Transfer Tax (ITP)
- 7% flat rate (irrespective of property value)
- 5% for young families (under 35 y.o.) on buying a main home (capped at €150,000)
- 6% on buying a main home (capped at €150,000)
- 5% on buying a main home and with disability (capped at €250,000)
- (long list of case-per-case reduced rates goes on and on) etc
Stamp Duty (AJD)
- 1.2% flat rate on buying property (off-the-plan)
- 1% on buying a main home (capped at €150,000)
- 0.3% in rentals
These tax changes are as good as it gets, period.
Andalusia’s regional government continues with its unabated trend of lowering taxes across the board.
The tax improvements are so prominent, they have turned Andalusia into an ultra-low taxation area. Andalusia and Madrid now have the lowest taxation in all of Spain.
The improvements foster foreign investments in Spain, and in particular in Andalusia.
These pivotal tax changes have not gone unnoticed by non-residents. In a 2021 survey, 12,000 expats from 174 countries, voted Malaga as the world’s second best place to work & live in.
If regional politicians continue doing such a stellar job, I won’t have anyone left to throw darts at, sigh.
At Larrain Nesbitt Abogados we can assist you buying & selling property in Spain and deal with its taxation. Ask us.
Larraín Nesbitt Lawyers, small on fees, BIG on service.
Larraín Nesbitt Lawyers is a law firm specialized in conveyance, taxation, inheritance, residency and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at email@example.com, by telephone on (+34) 952 19 22 88 or by completing our contact form to book an appointment.
Legal services available from Larraín Nesbitt Abogados:
- Buying distressed property in Spain – 8th August 2011
- Let-to-Buy in Spain: The Smart Choice – 8th of April 2012
- Buying resale property in Spain – 21st February 2013
- How to buy commercial property in Spain – 4th July 2014
- How to buy rural property in Spain – 8th August 2014
- How to Buy Property in Spain Safely – 10th October 2014
- House Hunting in Spain – Interview with The New York Times. June 2015
- Buying property in Spain from a private seller (Resale Property) – 21st of February 2017
- Buying property in Spain – 10 reasons to hire a lawyer – 8th November 2016
- Selling property in Spain – 10 reasons to hire a lawyer – 8th December 2016
- How to inspect an off-plan property overseas – Q&A with The Sunday Times. July 2017
- 8 Tips on Buying Off-Plan in Spain – 8th June 2018
- Tax advantages on becoming resident in Spain – The Address magazine (pages 358 – 373). December 2018
- Do’s and don’ts on buying property in Spain – 8th April 2019
- 8 tips on buying a home in Spain – 8th June 2019
- Home-Buyer’s Checklist – OFF PLAN – 1st March 2020
- Home-Buyer’s Checklist – RESALE – 11th March 2020
- 8 reasons to buy property on the Costa del Sol (Andalusia) – 8th April 2021
- Marbella’s high-end market is booming! – Idealista 30th June 2021
- Andalusia: now is the right time to buy property – 8th October 2021
- Andalucia property tax reduction extended into 2022 – Kyero 9th November 2021
- Tax breaks on buying property in Andalusia extended indefinitely! – 8th December 2021
Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. No politician was harmed on writing this article. VOV.
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