Are you a high-net-worth individual who is interested in investing in luxury property in Marbella or maybe considering a real estate development project on the Costa del Sol? If yes, you will be pleased to hear that Juanma Moreno (the President of Andalucia’s local government) has announced that as from this month (September 2022), the wealth tax in Andalucia will be scrapped. The legislation will come into effect in 2023.
This means you can go ahead and purchase your dream mansions in Marbella without worrying that you will later down the line be in the government’s crosshairs for wealth tax. In fact, this new law will release 16,700 taxpayers from the current wealth tax obligations.
According to Moreno, 50 percent of the highest taxpayers left Andalucia between 2019 and 2020, resulting in a loss of 18million euros for the region’s coffers, of which 3.5million euros could be attributed to wealth tax and the remaining 14million euros represents the loss of personal income tax.
Attracting wealthy residents
These measures are not unique to Andalucia. The local government is following in the footsteps of Madrid and the Basque Country which has no wealth tax. The reason for taking such a radical step is to entice wealthy residents to the region.
Wealth tax accounts for 0.6 percent Andalucia’s 95million euro annual income. Moreno estimates that a reduction to the overall tax burden will entice as many as 7,000 high net worth individuals to Andalucia. The 0.6 percent wealth tax lost with the abolition, will be more than compensated for by the increase in personal income tax and indirect taxes.
How wealth tax is applied in Spain
Wealth tax is a contentious issue. If you are fiscal resident in Spain living in any region (apart from Madrid, Basque Country and now Andalucia), wealth tax is payable on all worldwide assets. In Andalucia, the highest rate of wealth tax was pegged at 2.5% of the value of assets, with a personal tax allowance 70,000€. Similarly, there was a 300,000€ tax allowance for main residences before the wealth tax was levied.
These generous tax allowances in Andalucia effectively exempted the majority of the population from wealth tax. However, as mentioned above, the abolition of wealth tax will greatly benefit wealthy 16,700 taxpayers (figures from Bankinter) from this particular tax burden.
Non-residents also benefit
The new wealth tax legislation will apply to residents and non-residents alike who are living in the region. They will both enjoy the same exemption. This new development is great news for those interested in buying property on the Costa del Sol who have high-net-worth global assets. It will also be good for businesses, such as high-end real estate agents on the Coast and the wider economy as a whole.
Local income tax cuts in Andalucia
The good news keeps coming… this new fiscal package also includes regional income tax cuts for Andalucia’s less affluent residents. This equates to a 4.3 percent tax cut on local income for Andalucian residents’ earning between 12,450€ to 35,200€ per annum.
Up to the minute information
If you would like further information about tax in Andalucia (for both residents and non-residents) we can introduce you to experts within this field who will be happy to advise you. Also, please get in touch if you would like assistance sourcing a suitable investment property or to discuss a real estate development project, please contact email@example.com