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TAXES

EXPLAINED: What are Spain’s new regional tax breaks?

Seven Spanish regions have announced tax breaks which act as an extra benefit to the income tax reductions announced by the national government recently. Read on to find out what they are and how they could help you save.

Published: 4 October 2022 12:21 CEST
EXPLAINED: What are Spain's new regional tax breaks?
Which Spanish regions have announced tax breaks? Photo: JUANJO MARTIN / POOL / AFP

With Spain gearing up for local elections in May 2023 and a general election expected at the end of next year, regional governments and the left-wing national government are immersed in a tax war to sway the voting balance in their favour, with the official message being to help people across the country deal with the consequences of inflation and the rising energy and daily costs.

The biggest news so far has been that the national government has decided to reduce the income tax of people earning up to €21,000 ($20,200) per year, while introducing a new “solidarity tax” for those with more than €3 million.

READ MORE: How much will you save with Spain’s national income tax cut?

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

As such, each region can change its income tax brackets and the reductions will apply to the 50 percent of IRPF collected by the regional government. It does not represent a reduction in the overall income tax rate, but it certainly helps.

In recent weeks, several regions have announced tax breaks as well, but unlike those announced by the country’s Tax Minister María Jesús Montero, they’re not all related to income tax for low earners alone.

Madrid

Madrid has announced that it will reduce its regional IRPF by 4.1 percent. It is scheduled to come into force at the beginning of 2023 and is aimed at helping its citizens “face high inflation and the rise in energy, fuel or food prices,” according to the local government.

Once it is fully approved this year, it will be added to the tax validated by the Community of Madrid and which will mean an estimated collective saving of more than €300 million.

Madrid also recently announced that from Q1 2023, new autónomos in the region will have their social security fees paid for by her government for their first year of being self-employed. If their monthly earnings are below minimum wage in the second year (€1,166 gross a month), they will also have their social security fees covered by the regional government.

READ ALSO: New self-employed workers in Madrid to pay no social security tax

Valencia region

In late September, Valencian regional president Ximo Puig announced several financial reforms, which will make taxes in the region more progressive.

The biggest of these reforms was a reduction in the regonal income tax rates for those earning under €60,000 gross a year. This is estimated to help 97.4 percent of Valencian taxpayers or 1.34 million workers.

The new income rates will be retroactive and apply to earnings from January 1st 2022, so will be applied to the 2022 annual income tax declaration next year.

READ ALSO: Spain’s Valencia region lowers income tax for yearly earnings under €60K

Balearic Islands

On Monday, October 3rd Prime Minister Pedro Sánchez announced several fiscal incentives for the Balearic Islands.

The 2023 General State Budget will incorporate new specific tax deductions for the Balearic Islands. This will mean a deduction of 90 percent of the tax base in the corporate tax and income tax for non-residents for investments that promote job creation in the region.

There will also be a bonus of 10 to 20 percent for the sale of assets produced in the Balearic Islands within the industrial, livestock, agricultural and fishing industries.

Both of these are due to come into effect on January 1st, 2023. The Balearic Government estimates that these incentives will mean savings of €208 million for 47,000 companies and 71,000 self-employed workers.

Galicia

The government of Galicia has also announced certain tax breaks for its residents, including lowering personal income tax, from 9.4 to 9 percent, for those who earn below €35,000. This will also be in effect retroactively from January 1st, 2022.

Galician regional president Alfonso Rueda has also decided to reduce its wealth tax for residents with worldwide assets above €700,000 by a further 25 percent to reach 50 percent.

Andalusia

In Andalusia, the authorities will reduce the IRPF rate by 4.3 percent. It will affect all taxpayers and will be applied retroactively from January 1st, 2022 and will be reflected in the personal income tax return filed next year.

Andalusian regional president Juanma Moreno also announced that Spanish nationals and foreigners who reside in the southern Spanish region or have a second home there, and whose worldwide assets are above €700,000, will receive a 100 percent tax deduction on the region’s wealth tax. In other words, they will not have to pay any tax on their assets as is the case in almost all of Spain’s regions.

Murcia

Murcia will reduce its regional personal income tax by 4.1 percent, a measure which it estimates will benefit 330,000 residents, resulting in total savings between €8.5 and €10 million. It will affect 96 percent of those required to submit the income tax return, according to the regional government. 

Castilla y León

The regional government of Castilla y León has approved a draft law on tax reductions, which will allow personal income in the first tax bracket to be lowered by 5.3 percent.

Aragón, Cantabria and Navarra

Although the northern regions of Aragón, Cantabria and Navarra have not yet announced tax breaks, all three of them are currently contemplating it.  

In late September, Aragón’s regional president Javier Lambán admitted that it was a “possibility” if the four parties that make up his government agree.

In Navarra, the government is working on an “extraordinary deduction” on personal income tax for those who earn less than €32,000 gross per year.

The leader of the Cantabrian region Miguel Ángel Revilla also stated that “If the tide goes that way, we are not going to be left out”.

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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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