Reduction in Taxes in Andalucia
From 11 April 2019 the Andalucia region has new reduced tax rates for some of the most relevant taxes thanks to Regulation 1/2019 of 9 April which has been passed with the aim to encourage economic activity in this region.
The implementation of the new rules reduces the tax burden down to the level of the regions with the lowest taxation, such as Madrid, La Rioja or Murcia. It has been announced that Andalusian tax payers will save 235 million euros.
The most significant change relates to Inheritance Tax since there is a new allowance of 99% on the tax liability for those beneficiaries who are included in the groups defined by the tax regulation as I and II which are basically spouses, children and parents (including adopted and civil partners as long as they are registered in Andalusia). This new measure is to be added to the existing exemption which was applicable to this group of beneficiaries when the value of the estate they would receive was lower than one million euros and certain additional requirements were met.
A similar 99% allowance is provided for Gift Tax, as long as the gift is duly formalised in a public deed and the beneficiaries are included in said Groups I and II. This change is a significant difference if we compare it to the former regulation which did not include any allowances for gifts and therefore gifts were not considered as a worthwhile option in many cases to reduce someone’s asset due to the significant tax payable.
For example, a child who receives a 10,000€ gift from his parents had to pay the amount of 782.60€ as Gift tax whilst with the new allowance he would only pay 7.82€. If the amount is 60,000€ the tax payable would be 62€ instead of the 6,200€ Gift tax that would have applied before the Regulation.
In terms of the Personal Income Tax (IRPF) there is also a reduction of the tax rates and the maximum rate decreases by 1.7%.
Property Purchases
Property purchases also benefited from the tax reduction as Transfer Tax / Stamp Duty (ITP & AJD) rates are reduced in certain cases.
for example, instead of looking at the general rate of 8%/9% or 10% of Transfer tax in cases of the purchase of a resale property, a reduced rate of 3.5% would apply in the case of the buyer being a member of a family qualified as “large family” (for example parents with more than three children or two children if one has incapacity) when the property is going to be used as a permanent family home and the price is lower than 180,000€.
In the case of a company or self-employed person who wants to buy an office or premises, there is a Stamp Duty reduction from 2% to 1.5%.
To find out how this could affect you and your heirs contact us at enquiries@mylawyerinspain.com
My lawyer in Marbella denies that the 99% rule applies to a gift to a beneficiary in Category I and II. — Where can I find the original tax law (Spanish text is fine)? Thank you
Hello Carsten – The article states “A similar 99% allowance is provided for Gift Tax, as long as the gift is duly formalised in a public deed and the beneficiaries are included in said Groups I and II.” https://www.juntadeandalucia.es/boja/2019/508/BOJA19-508-00025-5334-01_00153711.pdf Hope that helps?