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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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For members

HEALTH

Are private health costs tax deductible in Spain?

Many expenses can be offset against taxes in Spain, but what about private health insurance and other medical costs? Can you deduct them in 'la declaración de la renta' (annual tax return)? It often depends on your circumstances and location.

Published: 2 May 2024 09:13 CEST
Are private health costs tax deductible in Spain?

Taxes are expensive in Spain, so anything that you can do to be able to make deductions or offset payments can help.

Not many people are aware that some private health costs such as health insurance can be tax deductible in Spain.

There are however certain requirements you must meet to be able to do this. It is generally only available to:

  • Self-employed workers registered as autónomo
  • Employed workers who have private medical insurance paid for by their companies
  • Companies that offer group health insurance to their employees.

This means that if you’re an employee who wants to get their own private medical insurance, unfortunately, you generally won’t be able to claim the payments back against tax.

READ ALSO – La Renta: What items can you deduct on your Spanish tax return?

Self-employed

If you run your own business or work for several different clients and are registered as autónomo in Spain, then you are able to deduct private health insurance.

Of course, you’ll already be covered by the public health system as you’ll be paying social security, but you may want to consider private health insurance too. The benefits include being able to get appointments faster and see specialists when you want.

Even though health insurance may be not completely necessary for carrying out your work, Law 35/2006 on Personal Income Tax states that it is deductible for self-employed people, provided they pay taxes through the direct estimation regime, which takes into account real annual income.  

It’s also possible to deduct private health insurance policies of your spouse and any children under 25 years old, as long as they live with you.  

  • You can deduct a maximum of €500 for each person in the family who meets these requirements, or a maximum of €1,500 if any of those people suffer from a disability.
  • Your total deduction for private health insurance as a family cannot exceed €4,500.  

It’s important to be careful when you’re taking out a private health insurance policy that you’re taking out the correct one for your circumstances, otherwise, you may not be able to claim it back. For example, if you want to be able to deduct your Sanitas expenses you have to take out the Sanitas Professional Plan only, you can’t pick and choose which you want. This means that if you want to be able to put this down as an expense you must communicate your intentions and situation with your chosen insurer first, so that they can advise you.  

READ ALSO: Record 850,000 people waiting to have an operation in Spain 

Employees who get private health insurance from their company  

If your company pays your private health insurance for you, it is considered to be a type of remuneration, but you are exempt from declaring it as work income, so are able to generate some tax savings on it.  

The limit is also €500 for each person included in the health insurance coverage. If the health insurance premiums exceed €500 per year, the rest will be taxed as a type of income.  

If you pay a portion of the health insurance yourself and your company pays the rest, you are also allowed to deduct these expenses.  

Tax-deductible medical expenses in the Canary Islands, Cantabria and Valencia

If you live in either the Canary Islands, Cantabria or Valencia, there are a set of special circumstances that allow you to offset health expenses against your taxes, no matter whether you’re self-employed or if your company pays private health insurance for you or not.  

Canary Islands  

It’s possible to deduct 12 percent of expenses and fees paid during the year for medical or health reasons including the prevention, diagnosis and treatment of diseases, dental health, pregnancy and childbirth, accidents and disability.  

Operations for aesthetic purposes are excluded unless they are intended to repair damage caused by accidents or are treatments aimed at helping those dealing with sexual identity.

It’s also possible to deduct 12 percent of the expenses paid for medical devices that compensate for physical deficiencies, such as glasses or hearing aids. 

The total amount deductible is €600 per year for individuals and €840 if joint a declaration is filed. If the taxpayer has a disability equal to or greater than 65 percent, an additional €100 deduction is added.

READ ALSO: Is it better to do a joint or separate tax declaration if you’re a couple in Spain?

Cantabria

If you live in Cantabria you are able to deduct 10 percent of private health services for illness, dental health, pregnancy, childbirth, accidents and disability. You can either claim it for yourself or your immediate family who live with you.  

The limit is €500 for individuals and €700 for joint declaration. These limits will be increased by €100 for those with a disability equal to or greater than 65 percent, and by a further €100 for each taxpayer with this disability, in the case of a joint declaration. 

Valencia

This year, the government of Valencia has also included a deduction for certain health expenses.

€100 can be deducted for the treatment and care of people affected by highly complex chronic diseases and “rare” diseases, as well as €100 for care for those diagnosed with acquired brain damage or Alzheimer’s disease. This will be extended to €150 for single-parent families.  

You can also deduct 30 percent of the expenses for:

  • Services and treatments linked to non-aesthetic oral health, with a maximum limit of €150.
  • Services related to mental health, with a maximum limit of €150.
  • Prescription glasses, contact lenses and cleaning solutions, with a maximum limit of €100.

Remember that if you live in any of these three regions and you want to be able to offset your medical expenses against taxes, you will need to pay with card and have proper invoices and receipts to prove what you have paid for.  

If you are unsure about what expenses you can claim, it’s best to contact your gestor or another tax professional to check about your specific situation beforehand. 

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