In a move that will make Andalucía one of the most attractive regions in Spain, Juanma Moreno the president of the Andalucían Government has announced that it will abolish Wealth Tax.
It is sadly uncommon for Governments to deliver on their promises, Andalucía’s Regional Government seems to be the exception.
One of the central policies of the centre right Partido Popular is the traditional conservative view that taxes should be as low as possible and that citizens should be trusted to spend their own money as they do so more sensibly than Government.
It all started on 5 April 2019 when the PP finally got into Government after 40 years of socialist rule and they started on their tax reform programme by virtually eliminating inheritance and gift taxes between spouses and direct family members.
Juanma Moreno, the president of the Andalucían Government, has announced today, 19 September, that Andalucía will be, from tomorrow, the region with the lowest taxes after Madrid, by abolishing Wealth Tax with immediate effect.
The new 100% exemption of wealth tax is justified with the complete logic that this abusive tax does not stimulate the growth of the economy and, in any case the tax collected is only 0,6% (95 million euros per year) of the budget of Andalucía. In fact, Juanma Moreno pointed out that suppressing Wealth Tax will easily be recovered as it will have a very positive impact on the attraction of people to live in the region with their investment capital and income tax payments.
Literally, thousands of high net worth individuals, investors and businesses, will be attracted to establish their permanent residence here, with their contributions stimulating the growth of the economy, jobs, better public services and security for its residents.
So, can we really say that Andalucía has become, like Madrid, something of a tax haven??
Perhaps not exactly a tax haven, which is not necessarily a good thing, but certainly a very comfortable place for both the modest and very wealthy. Most people know that paying a reasonable amount of personal tax is acceptable, and indeed responsible, and it is only punitive taxation that scares them away.
Here are the advantages of living in Andalucía, effective now:
- Virtually nil inheritance and gift tax for close family. Residents of countries such as the UK take note that moving to Spain can eliminate inheritance and gift tax permanently, if matters are properly organised.
- Maximum investment income tax of 26%. In fact the rates are between 19% and 26% with the top rate only applying on income over 200.000€.
- Capital gains tax rates of 19% – 26%, same as investment income.
- Buy to let residential letting net income taxed at an effective maximum tax rate of 20%.
- Letting income is calculated after deducting all related expenses, including loan interest. UK residents take note that Spanish income tax is effectively lower than the UK on BTL income.
- Private pensions are treated as investment income, taking income as the difference between sums invested and sums withdrawn. In some cases tax can be as low as 2.5% of income drawn.
- A full range of international tax treaties that ensure that double taxation almost never happens.
- The text of the new legislation will shortly be released and will also contain reductions in regional income tax rates for earned and other general income.
We know from discussions in the past with many, many, individuals wishing to move to Spain that they decided they couldn’t, often simply because of Wealth Tax. So, getting rid of this tax will be a true game changer, especially when combined with near exemption from inheritance tax and the relatively attractive income tax regimes.
We also predict that most of those that decided on basing themselves in other countries like Portugal will now change their minds and move to Andalucía full time. Many people who opted for residence in Madrid will now rethink their situation and move to one of the best areas of Spain, with all the benefits of the sea, mountains and inland beauty of Andalucia. There is no doubt that Andalucia is now going to present real competition for Madrid. Areas like Cataluña, the Balearics, Valencia and Murcia need to seriously rethink their tax systems and stop scaring off wealthy foreigners and Spanish nationals, with punitive taxes that are principally motivated by left wing political dogma.