Is Andalusia a tax haven? We check!
Since the beginning of its term in 2019, the Andalusian government has introduced many different tax changes. As a result, Andalusia has become – next to Madrid – the region of Spain with the lowest level of tax burden. Thanks to this, its attractiveness for foreign investors has increased. This is very clear: over the last 5 years, the share of foreign investment capital has increased by 40%.
It has long been known that low taxes are a magnet that attracts foreign investments. And these, in turn, have a positive impact on society, as they create new jobs and enable residents to improve their standard of living. For example, the Four Seasons hotel chain has decided to invest over EUR 650 million in Marbella, creating 4,000 new jobs during the construction phase and a further 750 permanent jobs once construction is complete. It is the type of investment that is gained by creating a healthy tax environment that is conducive to locating capital in a given place.
Below you will find the most important changes in the tax system, which explain why Andalusia has become number one in Spain in terms of real estate investment and why so many people here get rich quickly.
Tax changes in 2019
- Inheritance tax abolished
Andalusia has lowered the inheritance tax to the point where almost no one pays it anymore.
- Gift tax abolished
This means that relatives receiving a donation of money or assets in Andalusia pay little or no tax.
Tax changes in 2021
- The property transfer tax (ITP) has been reduced.
Another groundbreaking tax change was the reduction of the property transfer tax when buying real estate on the secondary market. The new tax rate is 7% versus the progressive 8/9/10% of property value that buyers had to pay before.
Initially, this tax relief was conceived as a temporary measure (in Spain "temporary" is the key word, most often simply meaning "permanent") to mitigate the severe effects of the Covid-19 pandemic. However, this reduction was later extended indefinitely.
This change in the tax rate translates into tax savings ranging from 15% to over 30%, depending on the transaction price of the property. The higher the transaction price, the greater the tax savings.
- Stamp Duty (AJD) reduced by 20%.
When buying real estate on the primary market, in addition to VAT, you must pay stamp duty. This fee has been reduced by 20% and is only 1.2% of the transaction price.
Tax changes in 2022
- Wealth tax abolished.
Another groundbreaking tax change was the abolition of the wealth tax. This has acted as a magnet attracting wealthy families to invest and live in Andalusia.
There are a few other positive changes, but the ones mentioned above seem to us the most important. The trend of lowering taxes in Andalusia continues and is a model for other regions of Spain due to its spectacular results. It also translates into legal stability and security in the medium and long term in tax matters, which are so important for investors.
So, is Andalusia a tax haven?
When politicians create the appropriate legal framework and tax incentives for entrepreneurs, investors and businessmen notice these changes and move their capital to friendly regions to create new companies and jobs. Such actions benefit the whole of society. Andalusia and Madrid are the best examples of this thinking and as a result have the lowest unemployment rates in all of Spain. Some may (incorrectly) call them tax havens, but really all the rulers do is use common sense.
The result of this approach to the subject of taxes in Madrid and Andalusia is a double-digit increase in foreign capital per year over the last 5 years. No other region in Spain has achieved this result.
Please note that according to the Spanish Constitution of 1978, each region in Spain has the right to regulate the level of taxes levied in its territory.
[source: Spanish Property Insight]
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