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TAX

The taxes in your region of Spain you probably didn’t know existed 

Madrid has just announced it wants to be the first region to scrap regional taxes, but what are these tariffs that apply to specific autonomous communities? And where in Spain do taxpayers pay the most?  

regional taxes spain
Which autonomous community in Spain has the most regional taxes? Photo: Javier Carro/Wikipedia

Spain’s 17 autonomous communities, with the exception of the Basque Country and Navarre, all have their own taxes which are applicable to people and companies in their territory. 

Known as impuestos propios (own taxes), these tariffs are applied by regional governments to address matters pertaining to their community which they’re looking to solve. 

On September 1st, Madrid’s regional president Isabel Díaz Ayuso made headlines by announcing she intended to scrap the remaining impuestos propios in the region (tax on slot and arcade machines in bars and restaurants and a tax on the storage of waste), amounting to €3.4 million annually for Madrid taxpayers.

This only accounts for 0.02 percent of taxes paid by the region’s 6.6 million inhabitants, but Ayuso’s announcement had made people across Spain more aware of the existence of these little-known regional taxes in their part of Spain.

Madrid’s leader has argued that some regional taxes are now becoming redundant or obsolete as other tariffs are introduced by Spain’s central government on a national level.

madrid scraps regional taxes impuestos propios

Ayuso has said her government will refuse to adapt its tax system to decisions made by Spain’s central government, especially when it comes to its very low taxes on inheritance and assets. Photo: Javier Soriano/AFP

Spain’s 17 regions are responsible for applying their own autonomous taxes, which depending on what they are, can make life more or less expensive for the average person in Spain depending on their location. 

Regional governments are also responsible for setting tax levels on inheritance and assets, which can vary enormously between territories.

EXPLAINED: How choosing the right region in Spain can save you thousands in inheritance tax

So which region of Spain has the most regional taxes? And what are the impuestos propios that you have to pay in your part of the country?

Catalonia

Catalonia has the most regional taxes of all of Spain’s 17 regions, with 13 impuestos propios adding €137.3 million to public coffers in 2020. 

The latest to be added is the tax on C02 emissions for vehicles, along with other tariffs on large commercial establishments, empty homes, tax on tourism stays, sugary drinks, a tax on luxury goods and several other environmental levies relating to water, waste and emissions. 

Andalucia

Spain’s largest region has the second highest number of regional taxes in the country with eight impuestos, although some of these are currently not applied. 

Taxes on unused land, credit agency customers, single-use plastic bags and a number of other environmental taxes added €145 million in tax revenue to Andalusian authorities in 2020. 

Murcia 

Murcia has six regional taxes in place in 2021: three environmental ones, one on bingo prizes, another on economic activities and a water treatment tax, all of which accounted for €55.9 million in taxes in 2020.

Galicia 

The northwestern region has six autonomous taxes which added €80 million to public coffers last year, including a fee on derelict or abandoned homes and a number of environmental taxes relating to mining, pollution, wind energy and water treatment.

Asturias 

Galicia’s northern neighbour also has six regional tariffs which added €118 million paid to Asturias’s tax office in 2020. They include a tax on bingo prizes, water treatment, unused rural land, large shopping centres, economic activities as well as environmental levies. 

Economists in Asturias are calling for regional authorities to lower levies for inheritance and asset taxes as well as regional taxes, suggesting higher-than-average tariffs are dissuading investors.

Canary Islands 

The Atlantic archipelago has five individual taxes, three of which belong to the Canaries’ unique IGIC tax regime (no VAT): General Indirect Tax, AIEM consumer tax and registration tax. The other regional levies are on tobacco, waste spills and petrol-based products.

Aragón 

Aragón in northeast Spain has five regional taxes, all of them environmental. In 2020 Aragonese authorities collected around €100 million from taxes on water pollution, atmospheric damage, environmental impact of large shopping malls, electricity installation and transport as well as on the use of stored reservoir water.

Extremadura

The western region also has five regional taxes which added €115 million to public coffers last year. Active tariffs in Extremadura are on landfill processes, water treatment and hunting.

Valencia region 

The eastern region has four regional taxes in total: a tax on empty homes for those with more than ten properties, tax on waste processes, activities that have an impact on the environment and water treatment. 

The Valencia region’s tax head Vicent Soler has referred to Ayuso’s words as a “smokescreen” that accounts for an insignificant amount for Madrid taxpayers and that slashing regional taxes “will mean those who need it most get fewer services”. 

The Balearic Islands 

The Balearic Islands also have four regional taxes, of which only two are currently applied: the tax on tourist stays (€36.8 million collected in 2020), which is based on overnight holiday stays on the islands, and the wastewater treatment fee (€78 million collected in 2020).

La Rioja

Spain’s famed wine-producing region has four regional taxes, with which in 2020 it added €12 million to its public coffers. These are a tax on cell towers that have a negative visual impact,  water treatment, waste management and a levy on economic activities.

Cantabria

Cantabrian authorities collected €27 million in 2020 from their regional taxes on water treatment, waste deposit in landfills and a levy on economic activities. 

Castilla-La Mancha

In the central Spanish region there are regional taxes on wind energy and economic activities that have an environmental impact.

Castilla y León

Authorities in Castilla y León have said they don’t plan to follow in Madrid’s footsteps and eliminate its own current environmental taxes, which are mainly paid by electricity companies.

Castilla y León currently receives almost €63 million with its tax on the environmental impact caused by certain uses of stored reservoir water, a tax on wind farms and another on high voltage electric power transmission facilities, as well as a further €7.6 million from landfill waste management taxes.

You can read more about impuestos propios on Spain’s Hacienda website (information in Spanish). 

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MONEY

Rampant branch closures and job cuts help Spain’s banks post huge earnings

Spain’s biggest banks this week reported huge profits in 2021 and cheered their return to recovery post-Covid, but ruthless cost-cutting in the form of thousands of layoffs, hundreds of branch closures and the removal of many ATMs have left customers in Spain suffering, in this latest example of ‘Capitalismo 2.0’. 

A man withdraws cash from a Santander branch in Madrid.
More than 3,500 Santander workers lost their jobs in Spain in 2021 and a further 2,000 more employees working for Santander across Europe were also laid off. Photo: PHILIPPE DESMAZES / AFP

Spanish banking giant Santander on Wednesday said it has bounced back from the pandemic as it returned to profit last year, beating analyst expectations and exceeding its pre-COVID earnings.

Likewise, Spain’s second-largest bank BBVA said on Thursday that it saw a strong rebound in 2021 following the Covid crisis, tripling its net profits thanks to a recovery in business activity.

It’s a similar story for Unicaja (€137 million profit in 2021), Caixabank (€5.2 billion profit thanks to merge with Bankia), Sabadell (€530 million profit last year), Abanca (€323 million profit) and all of Spain’s other main banks.

This may be promising news for Spain’s banking sector, but their profits have come at a cost for many of their employees and customers. 

In 2021, 19,000 bank employees lost their jobs, almost all through state-approved ERE layoffs, meant for companies struggling financially.

BBVA employees protest against layoffs in May 2021 in Madrid. Spain’s second-largest bank BBVA is looking to shed 3,800 jobs, affecting 16 percent of its staff, in a move denounced by unions as “scandalous”. (Photo by GABRIEL BOUYS / AFP)

Around 11 percent of bank branches in Spain have also been closed down in 2021 as part of Spanish banks’ attempts to cut costs, even though they’ve agreed to pay just under €5 billion in compensation.

Rampant branch closures have in turn resulted in 2,200 ATMs being removed since the Covid-19 pandemic began, even though the use of cajeros automáticos went up by 20 percent in 2021.

There are now 48,300 ATMs in Spain, levels not seen since 2001.

READ MORE:

Apart from losses caused by the coronavirus crisis, Spain’s financial institutions have justified the lay-offs, branch closures and ATM removals under the premise that there was already a shift to online banking taking place among customers. 

But the problem has been around for longer in a country with stark population differences between the cities and so-called ‘Empty Spain’, with rural communities and elderly people bearing the brunt of it. 

 

Caixabank laid off almost 6,500 workers in the first sixth months of 2021. Photo: ANDER GILLENEA/AFP

Just this month, a 78-year-old Valencian man has than collected 400,000+ signatures in an online petition calling for Spanish banks to offer face-to-face customer service that’s “humane” to elderly people, spurring the Bank of Spain and even Spain’s Prime Minister Pedro Sánchez to publicly say they would address the problem.

READ MORE: ‘I’m old, not stupid’ – How one Spanish senior is demanding face-to-face bank service

It’s worth noting that between 2008 and 2019, Spain had the highest number of branch closures and bank job cuts in Europe, with 48 percent of its branches shuttered compared with a bloc-wide average of 31 percent.

Below is more detailed information on how Santander and BBVA, Spain’s two biggest banks, have reported their huge profits in 2021.

Santander

Driven by a strong performance in the United States and Britain, the bank booked a net profit of €8.1 billion in 2021, close to a 12-year high. 

It was a huge improvement from 2020 when the pandemic hit and the bank suffered a net loss of €8.7 billion after it was forced to write down the value of several of its branches, particularly in the UK. It was also higher than 2019, when the bank posted a net profit of €6.5 billion.

Analysts from FactSet were expecting profits of €7.9 billion. 

“Our 2021 results demonstrate once again the value of our scale and presence across both developed and developing markets, with attributable profit 25 per cent higher than pre-COVID levels in 2019,” said chief executive Ana Botin in a statement.

Net banking income, the equivalent to turnover, also increased, reaching €33.4 billion, compared to €31.9 billion in 2020. This dynamic was made possible by a strong increase in customer numbers, with the group now counting almost 153 million customers worldwide. 

“We have added five million new customers in the last 12 months alone,” said Botin.

Santander performed particularly well in Europe and North America, with profits doubling in constant euros compared to 2020. In the UK, where Santander has a strong presence, current profit even “quadrupled” over the same period to €1.6 billion.

Last year’s net loss was the first in Banco Santander’s history, after having to revise downwards the value of several of its subsidiaries, notably in the UK, because of COVID.

The banking giant, which cut nearly 3,500 jobs at the end of 2020, in September announced an interim shareholder payout of €1.7 billion for its 2021 results. “In the coming weeks, we will announce additional compensation linked to the 2021 results,” it said.

BBVA

The group, which mainly operates in Spain but also in Latin America, Mexico and Turkey, posted profits of €4.65 billion ($5.25 billion), up from €1.3 billion a year earlier.

The result, which followed a solid fourth quarter with profits of €1.34 billion, was higher than expected, with FactSet analysts expecting a figure of €4.32 billion .

Excluding non-recurring items, such as the outcome of a restructuring plan launched last year, it generated profits of 5.07 billion euros in what was the highest figure “in 10 years”, the bank said in a statement.

In 2020, the Spanish bank saw its net profit tumble 63 percent as a result of asset depreciation and provisions taken against an increase in bad loans due to the economic fallout of the virus crisis.

“The economic recovery over the past year has brought with it a marked upturn in banking activity, mainly in the loan portfolio,” the bank explained, pointing to a reduction of the provisions put in place because of Covid.

In 2021, BBVA added a “record” 8.7 million new customers, largely due to the growth of its online activities. It now has 81.7 million customers worldwide.

The group’s net interest margins also rose 6.1 percent year-on-year to €14.7 billion, said the bank, which is undergoing a cost-cutting drive.

So far, it has axed 2,935 jobs and closed down 480 branches as the banking sector undergoes increasing digitalisation and fewer and fewer transactions are carried out over the counter.

At the end of 2020, BBVA sold its US unit to PNC Financial Services for nearly 10 billion euros and decided to reinvest some of the funds in the Turkish market.

In November, it launched a bid to take full control of its Turkish lending subsidiary Garanti, offering €2.25 billion ($2.6 billion) to buy the 50.15 percent stake it does not yet own.

The deal should be finalised in the first quarter of 2022.

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