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Andalusian tax reductions: Overview

August 13, 2019

After more than 35 years a new coalition has taken control over the Andalusian region, which announced massive tax cuts throughout its campaign for the following legislature. In the beginning of April, the new administration held up to its promise by issuing Decreto-Ley 1/2019, of the 9th of April 2019.

 

The first measures were implemented affecting the Inheritance and Donations Tax (Impuesto de Sucesiones y Donaciones) and Income Tax (Impuesto Sobre la Renta de las Personas Físicas – IRPF), as well as several others.

 

1. Impuesto de Sucesiones y Donaciones

 

The Andalusian government has eliminated, in practice, the Inheritance and Donations Tax for spouses and direct family members. To this end, it has approved a 99% reduction by the aforementioned Decreto Ley in the tax liability for kinship groups I and II.

 

Group I: Descendants and adopted children under the age of twenty-one

 

Group II: Descendants and adoptees of twenty-one years of age or older, spouses, ascendants and adopters

 

 

This tax cut makes Andalusia one of the autonomous communities with the lowest inheritance and donation taxation.

 

Regarding inheritance, Andalusians will enjoy a situation similar to that of the Canary Islands, Cantabrians, Extremadura, Madrid, Murcia, and Rioja. The neighboring autonomous communities of Extremadura and Murcia already have regulated a cut of 99% and Castilla-La Mancha, between 99% and 80%.

 

As for donations, Andalusia will go from being one of the communities with the highest tax burden on donations, to the group of communities with lowest tax rate, at the level of the Canary Islands, Cantabrians, Madrid, Murcia and Rioja.

 

2. Impuesto Sobre la Renta de las Personas Físicas

 

In four years, the maximum rate will be lowered by three percent: progressively, the levy will be reduced in all tranches.

 

  • The first income bracket (<20.200,00 EUR) will decrease from 10% to 9.5%

 

  • The brackets between 20.200,00 EUR and 28.000,00 EUR (which is taxed at 15%) and between 28.000,00 and 35.000,00 EUR (which is taxed at 16.5%) will be unified into a single bracket, so income between 20.200,00 and 35.200,00 EUR will be taxed at 15%

 

  • The brackets between 35,200 and 60,000 euros will be unified as well, and will be taxed at 18,5% instead of 19%

 

  • The bracket starting from 60.000,00 EUR will decrease from 23.5% to 22.5%.

 

  • The last bracket (the bracket for income from 120.000,00 EUR or more) is eliminated, so that the highest tax rate goes from 25.5% to 22.5%

 

 

The reduction in personal income tax will be carried out progressively by means of transitory provisions throughout the years 2019 to 2023. The first bracket of the tariff (the lowest incomes) will begin to be reduced for 2019 and will reach definitive taxation in 2020, meaning that the reduction in personal income tax will not have an impact on tax collection in Andalusia until 2021.

 

If you have questions with regards to estate planning or if you are experiencing tax issues in Spain, we offer years of experience in the field, so feel free to get in touch with us!

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