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TAXES

Spain to slap new tax on millionaires whilst cutting taxes for low earners

Spain will cut the income tax of low-earning households and introduce a new tax for residents whose wealth exceeds €3 million, the latest chapter in the fiscal war being waged between the left-wing national government and its right-wing regions.

Published: 30 September 2022 09:15 CEST
SPAIN-INCOME-TAX
"Since we began governing, we have been working to make our fiscal system more progressive, efficient and strong enough to support social justice," Spain's Budget Minister María Jesús Montero said. (Photo by GABRIEL BOUYS / AFP)

The government will reduce the income tax on people earning up to €21,000 ($20,200) per year, or one in two workers, Budget Minister María Jesús Montero told a news conference om Thursday.

At the same time, she confirmed the government will slap a new tax in 2023 and 2024 on residents whose wealth exceeds €3 million to help pay for inflation relief measures.

This so-called “solidarity” tax will affect some 23,000 people, or 0.1 percent of taxpayers, and raise €1.5 billion for state coffers over the two years, she added.

Prime Minister Pedro Sánchez’s government announced last week that it would create a temporary tax on the wealthiest population without giving details.

“Since we began governing, we have been working to make our fiscal system more progressive, efficient and strong enough to support social justice,” Montero said.

The announcement of the tax changes comes as Spain is gearing up for local elections in May 2023 and a general election expected at the end of next year.

Last week, the right-wing leader of Spain’s southern Andalusia region decided to axe wealth tax and lower income tax in a bid to attract wealthy taxpayers.

Within a matter of days, Valencia’s left-wing regional president announced a reduction in income tax for the vast majority of taxpayers in the eastern autonomous community. 

Spain’s Personal Income Tax (IRPF) is a state tax, but half of its collection is controlled by the autonomous communities.

READ MORE: How Spain’s politicians are waging a tax war ahead of 2023 elections

Spain is battling a surge in inflation as a result of the fallout from the war in Ukraine and the reopening of the economy after pandemic-related lockdowns.

The country’s inflation rate eased to 9.0 percent in September as energy prices fell, down from 10.5 percent in August, but remains high.

Sánchez has in recent months rolled out aid packages to help households and businesses weather the inflationary pressure, which has soared across Europe due to the Ukraine war.

It has introduced free public transport, subsidised petrol prices and temporarily slashed the sales tax on gas among other measures, in moves that are expected to cost some 30 billion euros — or 2.3 percent of Spain’s gross domestic product.

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MONEY

When should you turn down an inheritance in Spain?

There are several reasons why people increasingly turn down inheritances in Spain. Here's what you need to know about the possibilities, how it's done, and what happens next.

Published: 17 April 2024 09:04 CEST
When should you turn down an inheritance in Spain?

Apart from the death of a loved one, receiving an inheritance can also result in its own setbacks. Unfortunately, for some people, this is compounded by the fact that inheritances can become an extra source of stress, whether it be through family disputes or the bureaucratic work that follows.

Increasingly in Spain, however, people are rejecting their inheritances. Last year, Spaniards renounced more inheritances than ever before, consolidating an emerging trend in recent years and setting a record high, according to data from Spain’s General Council of Notaries.

Just over 56,100 people rejected their inheritances in all, 16 percent of the total number.

Why are they doing this, and when should you consider turning down an inheritance?

EXPLAINED: How choosing the right region in Spain can save you thousands in inheritance tax

When should you turn down an inheritance in Spain?

Traditionally, people turn down inheritances when it isn’t worth their while to receive it. In other words, usually because of the high amounts of debt the inheritance includes, meaning that the deceased has left more liabilities than assets.

This is usually much more common in times of economic downturn and uncertainty. This is why, in addition to financial uncertainty caused by the Covid-19 pandemic, the period of stagnant inflation that followed probably contributed to the number of people in Spain turning down inheritances in 2023.

Another reason that Spaniards turn down their inheritance is because doing so would not work out worthwhile after paying tax on it. This one obviously depends on how much (and the form) you are left.

Inheritance tax in Spain is levied on a regional basis. For more information on the best and worst areas for inheritance tax rates, see our coverage below.

READ ALSO: Where are the best and worst places for inheritance tax in Spain?

In cases of property inheritance, people also turn them down due high maintenance or repair costs, or because a property cannot be sold.

It may also happen that the heir named in the will has their own outstanding debts and does not want the assets inherited via the will to end up in the hands of their creditors. In these cases, the inheritance is waived so that the inheritance passes onto someone else (more on that below).

Obviously, though probably less common, some heirs renounce their inheritance out of generosity. If the heir is already wealthy, he or she may wish the inheritance goes to a relative who needs it more.

Named heirs have the right to study the contents of the inheritance in order to decide whether to accept or reject it. This is known as the right to deliberate, which is a period of 30 days in Spain.

How to renounce an inheritance in Spain

There’s a particular process for renouncing an inheritance in Spain, and a few things to know.

Firstly, even if the contents of the will are known, it cannot be renounced until the person in question dies.

Note that the decision to renounce or accept an inheritance cannot be changed, so be absolutely sure of your decision first.

If you want to renounce it, you must turn it down formally, in writing, normally before a notary or in a court of law.

Who receives the rejected inheritance?

If the principal heir turns down their inheritance, a substitute may be named in the will who will receive the inheritance in his or her place.

If no substitute is specified in the will, the inheritance is distributed in the following order, according to inheritance law experts Simarro Herencias:

Descendants (children)
Ascendants (parents, if alive)
Spouse.
Siblings, nephews and nieces.
Other family members up to the 4th degree.
The state.

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