Last April, the Andalucian Government gave the green light to another tax reduction in the region. According to the Government’s spokesperson, Elías Bendodo, it means a huge drop in taxation that will translate to savings of €329 million for over 4 million people.
The ultimate objective of the tax reform, as highlighted by the Andalucian Government, is to reduce the tax burden on access to housing . The road map includes boosting the property sector by reducing the taxes associated with buying resale homes. In addition, it intends to stimulate new-build supply with more affordable prices by reducing fiscal costs through stamp duty.
Today at Synesi, we’d like to spend some time analyzing the investment opportunities and improvements that these reductions mean for the property sector in Andalucia.
Step-by-step reform
“Andalucia should be committed to investment and job and wealth creation ”, Juanma Moreno, the President of the regional government emphasized, when the new tax reform was announced.
The tax reduction that the regional government has just implemented forms part of its aim to make Andalucia more competitive. And as Moreno stated, lower fiscal pressure is synonymous with investment.
The tax reform will affect all taxes controlled by the regional government and take place in two phases. The first has come about through a law to reduce property transfer tax (Impuesto de Transmisiones Patrimoniales in Spanish) and stamp duty (Actos Jurídicos Documentados). The law came into effect at the end of April and will remain in place until December 31st this year. It has an estimated impact of €223 million.
The second phase of the reform will be carried out through a proposal in the Andalucian Parliament and is expected to be approved within the next seven months. During this second phase, the Government will reduce the other regional taxes: Wealth, Inheritance and Donations (Patrimonio, Sucesiones y Donaciones), the corresponding regional levels of income tax and taxes on gambling.
Reduction in property transfer tax and stump duty rates
With this latest reform, the Andalucian Government aims to reduce the fiscal pressure for taxes whose rates are controlled by regional governments in Spain. The biggest reduction comes in the rate for property purchase, which falls from 8%, 9% and 10% to a flat rate of 7%.
In addition, and with the objective of boosting the property market and home construction in the region, there is also a reduction in notary taxes (Stamp Duty) from 1.5% to 1.2%.
As the Government explained, this means that in the case of a purchase of a property valued at, for example, €180,000, the associated taxes go down from €14,400 to €12,600.
Reductions in wealth, inheritance and donations taxes & regional levels of income tax
The Andalucian Government tax reform also includes a gradual reduction in regional levels of income tax to bring them in line with national rates. They will go down from eight rates to five by 2022 with the corresponding drop in regional rates.
With regards to the tax on inheritance and donations, a reduction of 99% will be introduced for Groups I and II (all descendants, spouses and ascendants). They will only pay 1% on estates inherited from close relatives. Also on the cards, is a reduction of up to €10,000 for relatives in Group III (siblings, nephews, nieces and aunts and uncles).
A fast route to investment
According to Bendodo, quoted in Forbes, “the Andalucian Government wants to send a clear and firm message to anyone thinking of starting a business project: Andalucia, the most populated region in Spain, is a fast route to investment”.
In his announcement of the reform, Juanma Moreno claimed that the new package of measures will make Andalucia the region with the lowest fiscal pressure in Spain. He also underlined that in the last two years, the region has been one of those with the highest capacity to attract investment despite Covid 19. He pointed out that foreign investment has grown by 64% against the decrease seen in the rest of Spain.
With this new fiscal reform and in the Bendodo’s words, Andalucia “as well as being a privileged place to live and visit, it will also be the ideal location to invest and work”.
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