Regional variations in Spain’s Wealth tax breaks and adjustments in light of ITSGF

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As outlined in the AEAT’s 2022 Wealth Tax Guide, when filing the Wealth Tax return for the 2022 financial year, seven autonomous communities in Spain offered regional tax breaks on this tax, each varying in percentage (Andalusia, Aragon, Asturias, Balearic Islands, Catalonia, Galicia, and Madrid). Later on, Extremadura and Cantabria also joined this list.

Generally, these tax breaks in the Wealth Tax (IP) by regional laws are straightforward: after state deductions and breaks, the remaining tax amount gets reduced by a certain percentage, which can be up to 100% in some cases. However, due to the rejection of constitutional appeals against the Temporary Solidarity Tax on Great Fortunes (ITSGF) and the complementary nature of these two taxes, several regions have recently adjusted their tax breaks in the IP.

Let’s take a look at these changes, region by region.

Andalusia

Initially, Andalusia offered a 100% general tax break, as introduced in September 2022. However, a recent law in December 2023 created a specific regime during the ITSGF, offering two options for tax breaks: one based on the difference between the IP and ITSGF taxes, and the standard 100% tax break.

Aragon

Aragon’s specific tax break remains unchanged, offering a 99% reduction for protected assets of disabled taxpayers.

Asturias

Like Aragon, Asturias keeps its 99% tax break for protected assets of disabled taxpayers, unchanged from 2022.

Cantabria

As of January 2024, Cantabria introduced a 100% general tax break, but it’s not applicable for net wealth over €3 million after deductions.

Catalonia

Catalonia has two unchanged tax breaks: a 99% reduction for disabled individuals’ protected assets and a 95% reduction for forestry properties with approved management plans.

Madrid

Madrid initially had a 100% general tax break, but it’s suspended during the ITSGF period, replaced with a tax break based on the difference between the IP and ITSGF taxes.

Extremadura

From January 2023, Extremadura introduced a 100% general tax break after state deductions.

Galicia

Galicia offers a general 50% tax break, adjusted during the ITSGF period to consider the ITSGF tax paid.

Balearic Islands

The Balearic Islands offer a 90% tax break on cultural consumption goods and have raised their tax-exempt minimum from €700,000 to €3 million.

Temporary Tax-Exempt Minimum in Murcia

Murcia doesn’t have regional tax breaks for the IP but has increased its tax-exempt minimum to €3.7 million for 2023 and 2024.

In conclusion, the recent reforms in Spain’s Wealth Tax have led to various changes in regional tax breaks across autonomous communities. Each region offers unique tax relief options, catering to specific assets or taxpayer circumstances, and some have made adjustments in light of the Temporary Solidarity Tax on Great Fortunes (ITSGF).

Whether you’re navigating the complexities of these tax breaks in Andalusia, Aragon, Asturias, Cantabria, Catalonia, Madrid, Extremadura, Galicia, the Balearic Islands, or considering the temporary tax-exempt minimum in Murcia, it’s crucial to stay informed and seek expert guidance.

For personalized advice and assistance with your Wealth Tax matters in light of these changes, visit CostaLuz Lawyers. Our team of experienced professionals is ready to provide you with the expertise you need to navigate these tax reforms efficiently and effectively.

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