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Becoming tax resident in Andalucía is worth to consider

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26 Apr 2019

The new regulations on Inheritance and Gift Tax in Andalucía will have a significant and wide impact:

  • It will make the acquisition of holiday homes in the region more attractive for foreigners as these allowances apply to EU residents and eventually to non-EU residents further to last court resolutions and interpretation of the law made by the Directorate of Taxation.
  • It will prevent relocation of residents in Andalucía to Madrid for family tax planning due to the extension of the scope of the allowances to donations and gifts, and consequently will encourage relocation from other regions to Andalucía.
  • It will boost the region as destination for retired people from Europe, a group of people particularily sensitive to inheritance tax.

But these changes will make living permanently in Andalucía an option to consider. Leaving inheritance tax aside, which was a dissuasive factor specially for people who do not have inheritance or gift tax between spouses in their countries of origin, the two main taxes are Income Tax and Wealth Tax.

Income Tax is not a relevant issue for someone to decide to become tax resident because taxes are more or less the same in all countries, with a 23% tax rate on saving incomes and 48% on standard income (to be reduced down to 45%).

However, it is Wealth Tax what may discourage people from moving to Spain permanently, a tax on the net value of the assets held worldwide. Nevertheless, people are not aware that this tax is limited by the amount of income for residents, and the tax liability can be reduced up to a maximum of 80%.

Surprisingly, a non-resident in Spain owning a house of substantial value could end paying a higher wealth tax on that single property compared to his/her entire worldwide wealth as resident.

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