Marbella Estates Summer Edition 43 - 2019

PAG 10 A 74 ADS 43.qxp_Maquetación 1 29/5/19 13:02 Página 66
LEGAL
INHERITANCE & GIFT TAX
PRACTICALLY ABOLISHED
IN ANDALUCIA
by Bernard Fay
The Regional Government of Andalucia has approved a
reduction of 99% in inheritance and gift tax in Andalucia.
This important tax change, which came into effect on the
11 th of April, has considerable effects for residents and
non-residents of this southern region of Spain which
comprises 8 provinces, Sevilla, Huelva, Cadiz, Malaga,
Cordoba, Granada, Jaen and Almeria.
Inheritance and Gift taxes will not be fully abolished but
the tax payable in Groups I and II of kinship (Spouses,
children, grandchildren and parents) will effectively be
reduced for inheritance and gift tax by 99%, leaving a
symbolic 1% as a sort of control tax. The obligation to
file the return will exist but the actual tax payable will be
negligible. In Andalucia, since the approval of Law
5/2017, there are some exemptions in inheritance tax
for Groups I and II which will remain in place.
Taxes, generally, are very much a concern when
potential buyers of property consider Spain to move to
or simply to own a property to enjoy holidays in a
warmer climate. This is particularly the case with people
that have retired or sold their business as they need to
understand the implications for them and their families
of such an important decision. Inheritance tax is always
at the forefront of taxes to consider.
This change in inheritance and gift tax will have a
positive impact in the real estate sector on the southern
coast of Spain, people that were concerned about
inheritance tax will no longer have to worry, but the
Government of Andalucia should go a step further and
do something similar with the dreaded wealth tax. This
tax remains an issue for people considering moving to
live in Spain permanently, wealth tax is a dated tax that
should be eliminated or at least reduced in a similar way
to what has been approved for inheritance and gift tax,
it does not make sense to expect people moving to live
in Spain to pay wealth tax on net wealth held in other
parts of the world.
Accumulated wealth has invariably already been taxed
in the country where it was generated so to have to
effectively pay tax on savings operates as a counter
incentive to investment.
Other regions of Spain such as Madrid have become
very attractive from a tax point of view, inheritance and
gift tax are reduced in the same way as now in
Andalucia, but there is no wealth tax.
If Andalucia wishes to continue to attract foreign
investment into its real estate sector, taxes have to stop
acting as a barrier. The new Regional Government of
Andalucia seem to be conscious of that and they have
certainly taken steps in the right direction, but they
need to be brave enough to continue in this direction
and eliminate wealth tax. The return will come with a
boost in the economy, which will result in creation of
employment and increased collections in indirect
taxes.
Bernard Fay is co-managing partner of
UHY Fay & Co in Spain, the leading professional
service firm, with offices in Marbella, Malaga,
Madrid and Barcelona, member of
UHY International