Spanish expat hub scraps wealth tax

The authorities in the southern most region of Spain, Andalucía – a major expat destination – has announced it is scrapping wealth tax for residents and second homeowners with immediate effect. Spanish nationals and expats with worldwide assets of €700,000 will no longer pay tax on them. This is a major u-turn in policy. The president of the Junta, Juanma Moreno, said the abandoning of this tax will attract investment to the region, and he also announced a reduction in the rate of income tax and the cancellation of the water tax in 2023. In a statement the Junta de Andalucía said: “The decree law approved by Andalucía’s Governing Council contemplates the abolition in practice of the Wealth Tax by means of a 100% discount on the quota. As it is a ceded tax, only the central government has the power to abolish it. The objective of this measure is to attract new taxpayers to Andalucía and for this autonomous community to become the fiscal residence of a greater number of taxpayers. Many of them already live in Andalucía, but do not have their fiscal residence here. If they had it, they would be obliged to pay taxes on all their assets throughout the world.” The statement released this week went on to say: “The Wealth Tax represents barely 0.6% of the community’s tax revenue. The drop in revenue due to the abolition of the Wealth Tax can be alleviated with the increase in taxpayers foreseen in IRPF, as already happened when 100% of the Inheritance and Gift Tax quota was subsidised for relatives in groups I and II. Andalucía multiplied by four in personal income tax the amount that was not collected due to the abolition of this tax. Wealth Tax is considered an anomaly in advanced countries. In the scope of the OECD, in addition to Spain, it only survives in Norway and Switzerland.  The fact that it does not exist in our immediate environment, including the community of Madrid, has caused the Wealth Tax to behave with a brake when potential taxpayers install their tax residence in Andalucía.” Most experts agree that this move will help entice even higher numbers of expats to a region which is already one of the world’s most popular destinations for people from overseas.

Expats in Andalucía

According to data provided by the Spanish National Institute for Statistics, in 2019 there were 8,410, 002 inhabitants in Andalucía, within which 653,146 were expats. This is likely to be significantly higher, however, as many do not register as is expected. Some estimates put the real figure as 1 million expats. The most popular areas for foreign nationals are between Nerja and Sotogrande on the Costa del Sol.

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