Transfer taxes for resale property purchases in Andalucia have been slashed from the current 8-10% to a flat rate of 7%. This revealed by officials from the regional government, the Junta del Andalucia who confirmed this reduction is now in effect following the publication of the official regional bulletin, known as the Boletín Oficial de la Junta de Andalucía (BOJA). This reduction of the transfer tax (Impuesto de Transmisiones Patrimoniales or ITP) applies to all resale property purchases taking place in Andalucia region includes Marbella and the Costa del Sol. For new build properties, stamp duty has been reduced from 1.5% to 1.2%.
This is a welcome initiative by the regional government as it offers an excellent opportunity for buyers to make considerable savings on their property purchases. However, buyers should be aware that these incentives will only be effective until 31st of December 2021
THE ANSWER IS YES! ...YES REALLY!
Many politicians like to, and do, make grand promises of reduced tax and increased public spending, and the three right wing parties during the December 2018 elections were no different. Or so we thought.
Reduced Tax promises were made in order to make Andalucia a more attractive location from a tax perspective, with suggestions made of their desire to eliminate wealth tax, inheritance tax and gift tax.
The difference this year is that, to everyone’s surprise, the new right wing, coalition government which includes Partido Popular, Ciudadanos and Vox and under the leadership of the PP, have indeed kept their promises to reduce tax. Yes, you read that right!
IF YOU CHANGE NOTHING, NOTHING WILL CHANGE.
Andalucía has spent the last 40 years, from 1978 to 2018, under the control of the same socialist part – the PSOE.
Recent changes mean that Andalucia is fast becoming one of the best places to live, from a tax perspective, as opposed to one of the worst, making us a much more attractive location than the UK, Portugal and Madrid.
Tax reduction of 99% on Inheritances and gifts between spouses, parents and children.
The previous 1 million deductions per beneficiary also remain so that most taxpayers will not pay any tax at all.
IMPORTANT: A GIFT OF REAL ESTATE BY DEED WILL NOW ONLY COST 1 % INSTEAD OF THE 8%-10% TAX CURRENTLY CHARGED.
Over the next four years, measure are being put in place to lower Andalusian Income Tax rates to be similar to that of Madrid, which are currently the lowest rates in Spain.
New tax measures will reduce the number of tax bands and the tax rates both for low and high income earners.
The subject of wealth tax is the only one that has not yet had a formal announcement. This tax is most important of course to the more affluent of individuals in Andalucia.
The tax was originally introduced as an emergency measure in 1979 and it appears that the country has been in a state of emergency ever since - the situation goes to prove how difficult it is to rid a tax, once introduced.
A 100% exemption was set from wealth tax in 2008 but it was quickly reversed three years later due to another "economic emergency”.
State legislation is already in place to eliminate wealth tax for the whole of Spain on 1 January 2020 - but if they deem it another state emergency the government can reverse this as they have before, so we would strongly suggest expressing some caution here.
Andalucia will have no inheritance or gift tax.
Maximum taxes set at 23% for investment income and capital gains tax
Tax set at 19% on residential property income and as little as 6% on personal pension income.
Possibility of zero wealth tax from 2020.
That makes Andalucia an almost tax haven!
SOURCE: Spence Clarke & Co Andalucia based tax and legal consultants