Mark Stücklin
Spain’s regional tax map is sharply divided: Madrid leads the country for tax competitiveness, while Catalonia and the Valencian Community languish at the bottom.
The Tax Foundation’s latest Regional Tax Competitiveness Index (RTCI) confirms what investors already suspect — that where you live or invest in Spain can make a huge difference to how much tax you pay.
Once again, Madrid leads the way as Spain’s most tax-competitive region in the 2025 index. The capital region’s balanced approach to income, inheritance and wealth taxes keeps it streets ahead of the rest. Its policymakers continue to fine-tune the system — increasing inheritance tax relief for more distant relatives and maintaining a light touch on wealth — which helps explain why Madrid remains a magnet for investment, business, and affluent residents from other parts of Spain (and Europe).
Madrid’s only minor criticism from the Tax Foundation was that it could further improve by indexing income tax brackets to inflation and slightly reducing the top inheritance tax rate. Even so, its overall score of 7.02 out of 10 leaves it comfortably in first place, followed by the Basque provinces and La Rioja.
Catalonia: last place again, despite tweaks
At the other end of the scale, Catalonia has once again claimed the unenviable title of Spain’s least tax-competitive region. Despite a few modest income-tax adjustments, the regional government managed to make things worse overall by hiking property transfer taxes to as much as 13 percent and slapping a new 20 percent levy on purchases of entire buildings or homes bought by large landlords.
Catalonia now has twice as many regional taxes as the average Spanish region, alongside some of the highest income, inheritance, and wealth tax burdens in the country. Combined with Spain’s already poor showing in the OECD’s International Tax Competitiveness Index — near the bottom of the global league — Catalonia must now rank, from a tax perspective, among the least attractive places for property investment in the developed world.
Valencia: small reforms, but still near the bottom
The Valencian Community managed to avoid further decline but still sits near the bottom of the list in 16th place. It did raise its wealth-tax exemption threshold from €500,000 to €1 million and repealed three minor regional taxes — modest improvements that may lift its ranking in future editions.
Yet Valencia continues to suffer from punishing transfer taxes and a combined top marginal income-tax rate of 54 percent — the fourth highest in Europe after Denmark, France, and Austria. So while small steps have been taken, the region remains a long way from competitiveness.
A widening fiscal divide
The RTCI makes clear what many already sense: Spain is fragmenting into high- and low-tax regions, with Madrid and the Basque Country leading the charge on reform while Catalonia and Valencia burden their taxpayers ever more heavily.
For investors, entrepreneurs, and property owners, the lesson is simple — in Spain, your address can make a world of difference to how much tax you pay.
