Wealth Tax Set To Be Replaced By Large Fortune Tax

Andalucía has become one the top 3 regions in Spain with the least taxes.  On the 21st September 2021, the regional president, Juanma Moreno, announced the scrapping of Wealth Tax in Andalucía.

The tax has accounted for just 0.6% of income for the regional government (€95m annually), and Moreno believes the change will have a very positive impact on increasing revenue by attracting investment.

A large number of the highest wealth tax payers left Andalucía in 2020, resulting in a loss of income of estimated at around €18m (€3.5 million euros in wealth tax and €14 million in personal income tax).

The president is hoping that removing Wealth Tax will encourage people with high income who spend long periods in Andalucía, but are not tax resident, to make it the region their permanent home and pay tax there.

Moreno’s estimate is that the tax reduction will attract 7,000 new residents, the result being that the 0.6% of income lost will be far exceeded, through income tax and other indirect taxes collected.

As wealth tax hasn’t been abolished, the annual tax return still has to be done according if, according to the law, ‘ . . . the value of their assets or rights, determined in accordance with the tax regulations, is greater than €2,000,000 euros.’  However 100% tax relief will be being granted to zero the liability.

New ‘Large Fortune’ Tax Proposed

The good news of Andalucía’s Wealth Tax reform, was shortly muted by news that the Spanish government plans to impose a temporary national ‘tax on large fortunes’.  The tax is yet to be approved by parliament, but is is expected to be implemented for 2023 and 2024 and will affect individuals with net wealth above €3 million.

Since wealth tax is collected by the regional Government, it was confirmed that any wealth tax paid would be offset against any ‘large fortune tax’ bill.  As Andalucía now give 100% wealth tax relief, residents in Andalucia won’t have to pay wealth tax, however if their net assets equal €3 million or more, they would have to pay the ‘large fortune tax’.

The proposed rates are as follows:

  • 0% up to €3 million of net wealth
  • 1.7% between €3 million and €5 million of net wealth
  • 2.1% between €5 million and € million of net wealth
  • 3.5% for a net wealth of over €10 million

According to the information provided by the Spanish Ministry of Finance, the tax on ‘large fortunes’ tax will affect 23,000 taxpayers and raise €1.5 billion in revenue, which will be used to finance policies to support the most vulnerable who are affected by the recent steep rises in cost of living.

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