Many Spanish Autonomous Communities have already approved their budgets for this year, pre-empting the government, which hopes to be able to present its General Budget of State 2018 before Easter. Lots of the Spanish regions have applied new fiscal laws on those taxes that are in their jurisdiction.
In general terms, the changes are mainly related with Inheritance Tax (Impuesto de Sucesiones), Income Tax (Impuesto de Patrimonio) and deductions in Personal Income Tax (Impuesto sobre la Renta de las Personas Físicas or IRPF) for rental and refurbishment of properties, although in this last case it is necessary to wait for the tax returns for next year to be able to benefit from it. With the private bank Andbank and the Spanish Association of Financial Advisors (Asociación Española de Asesores Fiscales or AEDAF), we go over the most important changes in each Autonomous Community in terms of properties, investment, inheritance and donations:
Andalusia
1. The minimum tax exemption for Inheritance Tax (Impuesto de Sucesiones y Donaciones), is being raised, going from 450,000 euro to one million. Recently, this autonomous community has registered one of the highest levels of people rejecting their inheritance in the whole country, largely due to this tax.
2. There will be a tax reduction for donating a main residence to relatives with a disability. This reduction will be 99% up to a limit of 180,000 euro, providing certain requirements are met: for example, that the donor must be legally disabled, the house is to be used as a primary residence and this is formally put down in writing in the public deed of the donation, and also that the value of the inheritance not exceed 402,678.11 euro.
Aragon
According to the AEDAF, there is an agreement in the courts that the Budget Bill (Proyecto de Ley de Presupuestos) will be ratified on the last day of February 2018. As far as we can tell, the Government of Aragon will not collect new taxes of any significant size because of this in 2018.
Asturias
At the end of December, the Government of Asturias announced an extension of the 2017 budget for the 2018 fiscal year because there are no new tax changes.
Balearic Islands
1. In this autonomous community, there is an increase in tax deductions for investing in refurbishments to main residences, from 15% to 50%, with a maximum of 10,000 euro per fiscal year, providing that the taxable income of the taxpayer is no more than 30,000 euro (the limit is 48,000 for joint taxation).
2. The article relating to tax deductions for renting a main residence is being changed to benefit certain groups. Which ones? For example, taxpayers under 36-years-old, people with a physical disability of over 65% or mental disability of over 33%, and a parent or parents that live with children in their custody and are part of a large family. The limit to these deductions will go from 300 to 400 euro, and the threshold for applying them requires the individual to have a taxable income of 20,000 euro or less (34,000 euro for joint taxation).
3. A new tax deduction for renting properties destined to be residences is being introduced. This means that 75% of the costs to cover any default on the rent will be met by the taxpayer in credit insurance premiums, up to a maximum of 400 euro per year, as long as they meet additional requirements (contract length of more than a year, security deposit and a declaration by the landlord in the Personal Income Tax (IRPF) returns of the profits derived from this rental).
4. There is a new deduction for renting properties for the purposes of a temporary residence due to work reasons. This deduction will be 15% of the costs paid, up to a maximum of 400 euro per year. There are certain additional requirements to be met.
Basque Country
The association of financial assessors reminds us that the case of the Basque Country is special because the region has three different tax areas, each one with its own general budget and tax rules for each of the three territories of Biscay, Gipuzkoa and Álava.
In the case of Álava, there are changes to Property Tax (Impuesto sobre Bienes Inmuebles or IBI). According to this report in Spanish from the Administración Foral, the Basque tax office, financial ordinances have been approved to regulate a discount that could reach 50% of the fee of this tax in favour of properties in which there are systems in place for the technical or electrical harnessing of solar energy or other renewable energies, which is the new part that has been introduced. Properties which have a class A or B energy efficiency rating can also benefit from this discount.
Gipuzkoa, meanwhile, has approved changes to Inheritance Tax (Impuesto de Sucesiones y Donaciones), which has new tariffs for relationship Groups II and III. In general terms, the minimum tariff to pay is 5.7% and the maximum 42.5%.
The Administration of Biscay are also establishing changes to Inheritance Tax for relationship Groups II, III and IV, the minimum tariff being 5.7% and the maximum 34.5%.
Canary Islands
1. There is a change in the tax deduction for refurbishment of the energy efficiency of a main residence, by which one can achieve a deduction of 10% (with a limit of 10% of the total fee of the autonomous community) of the amount destined for energy efficiency renovations. The conditions are that the main residence must be the taxpayer’s property and the maximum taxable amount cannot exceed 7,000 euro.
2. There are changes in the tax deductions for renovations to make a main residence adequate for the needs of disabled people. The deduction will be 10% of the amount allocated for renovation work or specialist installations, according to the IRPF regulations.
3. In the case of already planned tax deductions for donations for the acquisition or renovation of a main residence, donors who have a level of 33% are included, and not only above this percentage as it was before.
4. The amount of the total of the following deductions are being limited: for amounts allocated for restoration, renovation or repairs; for investments in main residences; for renovation or reform works of properties; and for adaptation of main residences for specialist needs. The new limit is 15% of the total fee of the autonomous community.
Cantabria
1. The tax scale of Income Tax (Impuesto sobre el Patrimonio) is being increased. All the tax bands have been increased: the minimum rate will go from 0.02% to 0.24%, while the maximum rate will go from 2.5% to 3%.
2. A new tariff is being created for Inheritance Tax (Impuesto de Sucesiones y Donaciones). The tax bands are reduced from 16 to 4 and the rates are between 1% and 30% (before they were between 7.65% and 34%).
3. The tax rebate for inheritance is changing. Up to 100,000 euro, the rebate will be 100%, whereas inheritance above this amount will have a rebate of 90% (before it was 99%).
4. There will be a regulation of the limits (up to 50,000 euro in insurance), reductions and degree of relationship for Gifts Mortis Causa of main residences will be 95%, down from the previous level of 99%.
5. In the Property Transfer Tax and Documented Legal Acts (Impuesto de Transmisiones Patrimoniales y Actos Jurídicos Documentados or ITP-AJD), the tax rate for onerous transfers of property will have a reduced VAT rate, that is, 10%.
Castile-La Mancha
The regional budgets for this tax year do not include big fiscal changes and there are no modifications relating to properties or inheritance.
Castile and León
1. The minimum exemption for Inheritance Tax (Impuesto de Sucesiones y Donaciones) is being raised from 300,000 to 400,000 euro. What’s more, a reduction of 99% on any acquisition will be established when the causative agent is the victim of terrorism or domestic violence, or the purchaser has been the victim of terrorism.
2. The base of the 99% reduction on monetary donations to descendants for the acquisition of a main residence is being raised up to 180,000 euro from its previous level of 120,000 euro. In the case of donors with a level of disability of 65% or more, the 99% reduction will apply up to 250,000 euro, as opposed to the previous level of 180,000.
3. In the Property Transfer Tax (ITP), the current rate is being reduced from 5% to 4% for certain cases in which are transferred properties which will be built into main residences.
4. In the deduction for renting a main residence in the autonomous community for those under 36-years-old, the percentages increase. As a general rule, it will be 20% with a limit of 459 euro (formerly 15%), and will be 25% with a limit of 612 euro when the property is in towns with a population of up to 10,000 inhabitants, or 3,000 if it is less than 19 miles (30km) from the capital of the province.
Catalonia
While it waits for a new Autonomous Government to be formed, the region has not approved any new budgets nor confirmed that they will extend the current one. As such, any changes to the tax law are currently unknown.
Extremadura
1. In terms of Inheritance Tax (Impuesto de Sucesiones y Donaciones), there is an allowance in the fee of 99% for inheritance between direct family members, from parents to offspring, from offspring to their parents, and between spouses.
2. The reduced tax rate of 0.1% remains steady for the Documented Legal Acts (Actos Jurídicos Documentados or AJD) for deeds for the acquisition and financing of a property that will be a main residence marked as an “average house”.
Galicia
1. There is a deduction in the IRPF for the renovation of properties located in historical centres. Specifically, one may deduct 15% from the amount invested up to a limit of 9,000 euro.
2. In the Income Tax (Impuesto sobre el Patrimonio), new deductions are included this tax year for participation in equity of entities which make use of properties in historical centres. It will be 100% of the proportional fee, as long as the properties in question are involved in economic activity for at least half the year.
3. With respect to the ITP, various deductions are forecast, among which are a deduction of 100% of the fee for the purchase of land for industrial development by public sector entities with the function or social objective of such an end; a deduction of 100% for the fee for the sale of public corporate land by public sector entities which have as their function or social objective the development of said land or the purchase of land for industrial development by entities which are instrumental in the public sector with the function or social objective of such an end.
La Rioja
1. So far, the region has not approved the budget, although the association of financial advisors forecast changes in Income Tax, which will apply a discount of 75% to the fee.
2. In as far as it makes reference to the acquisition of a property, some benefits in the payment of tax are being removed in areas such as the ITP and the AJD, which means that there are discounts for both used properties and new constructions, respectively.
Madrid
The deduction for rental of a main residence is being improved for taxpayers under 35 years of age, going from 20% to 30%, and the maximum is increasing to 1,000 euro from the previous 840 euro. It will also apply to under 40s if they are unemployed or have families in their care.
Murcia
1. A deduction of 99% is being introduced on the fee for the Inheritance Tax (Impuesto de Sucesiones y Donaciones) for families in relationship Groups I and II, that is, spouses, ancestors, descendants, adopters and adoptees.
2. With respect to said tax, there are also some reductions in the taxable income being removed, for example, for the donation of a main residence or an amount in cash with the purpose of the acquisition of one; for the donation of a plot of land intended for the construction of a main residence; for the acquisition of properties intended to house or enlarge a personal business, professional company or the acquisition of the shareholdings in entities; and for the acquisition of properties integral to the cultural heritage of the autonomous community of Murcia.
Navarra
There are changes in the Inheritance Tax. Up until now, a rate of 0.8% was applied to inheritance between spouses or civil partners and between direct family members (parents and children), regardless of the amount of inheritance. From now on, though, the first 250,000 euro are exempt. After that, the inheritance between partners will continue to be taxed at 0.8%, while the inheritance between parents and children will be taxed at 2% and 16% for amounts over 3 million euro.
For properties, the main changes are the end of the fiscal deduction of all those who buy a flat and of the 40% fiscal reduction of the rent claimed by the owner renting the property. This discount will only apply in rentals carried out via Nasuvinsa.
Valencian Community
1. In the IRPF, the deductions for renting a main residence are changing as there are modifications to the requirements. Now, for these deductions to apply, it is necessary that the landlord and tenant present a copy of the reverse charge of the ITP-AJD accrued from the rental contract of the property.
Meanwhile, the limit for deductions is being increased to 550 euro, and up to 700 euro for tenants of 35 years of age or under or those with a physical or mental disability. If both these requirements of age and disability are met, the limit is 850 euro. Furthermore, the net tax base and the savings tax base cannot exceed 25,000 euro in personal taxation, nor 40,000 euro in joint taxation.
2. In the ITP-AJD, there is a new allowance for property transfers to a professional or an entity in the real estate sector for later sale or rental as a main residence for a physical person. The percentage of the allowance will be 50% when it is to be rented or when, in the case of being sold, the property has been renovated. If both of these requirements are met, the allowance can be up to 70%.
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