From 21 September 2022, a 100% discount on el impuesto de patrimonio, or property tax, is being introduced in Andalusia! Thus, the local government is once again reaching out to investors wishing to live on the Costa del Sol or own a second property in this or other regions of Andalusia.
From 21 September 2022, Spanish nationals and foreigners who live in the south of Spain or have a second home here and whose net assets in Spanish territory exceed €700,000 will receive a 100 per cent rebate on their accrued wealth tax. In other words, they will not have to pay tax on their assets. Andalusia will therefore be the ONLY region besides Madrid where there will be no de facto wealth tax!
When planning an investment in real estate in Spain, it is worth remembering that the regional governments of the 17 autonomous communities have complete freedom to introduce tax breaks and property exemptions. Therefore, when calculating the profitability of an investment, it is advisable to thoroughly analyse the legal regulations in force in each autonomy or seek the assistance of an expert familiar with the Spanish legal system and the local property market.
What is a wealth tax?
El impuesto de patrimonio is imposed on a taxpayer whose declared net assets exceed €700,000. This applies to movable and immovable assets, i.e. houses, premises, real estate, works of art, jewellery, shares or bank deposits.
Until now, owners of a property in Andalusia for whom it was their main residence did not have to include it as an asset in the calculation of wealth tax, but only if its value did not exceed €300,000. Assets with a value of up to €700,000 per taxpayer were also exempt from tax, but declarations had to be filed. If this value was exceeded, their owners would have to pay between 0.2 and 2.5 per cent on any amount above the said threshold. For example, if a person’s assets were assessed at €750,000, then they would pay 0.2 per cent tax on €50,000. If two persons owned property or joint assets worth €2m, then each was exempt from the above tax of €700k, i.e. €2m – (2 x 700k). Tax had to be paid on the remaining amount of €600k.
Figures from the tax authority show that wealth tax in Andalusia had to be paid by more than 16,000 taxpayers in 2020. In total, they paid more than €93 million into the Andalusian budget and their average wealth was around €2.7 million in 2020.
Andalusian government encourages property investment
The abolition of the wealth tax is another of the steps taken by the autonomy government with a view to those wishing to invest in the region, especially in luxury properties. In mid-2020, the local authorities decided to standardise and reduce the transfer tax that people buying property on the secondary market had to pay. Initially, the new regulations were to apply only until the end of 2021, but the good performance of the Andalusian property market prompted the government to extend them indefinitely. It should also be remembered that Andalusia (along with Madrid) has the lowest inheritance and gift tax, i.e. 1%.
The introduction of a 100% property tax rebate and a reduction in the transfer tax are not the end of the changes announced by the Andalusian government’s prime minister, Juan Manuel Moreno Bonilla. From 1 January 2023, water tax will also cease to apply in Andalusia. Andalusia is thus likely to become the second region in the country with the fewest taxes!
If you would like more information on the regulations applicable to property owners in Spain, or the costs of maintaining a house or flat, we encourage you to contact us directly.
