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The new tax laws in Spain’s Andalusia in 2022: What you need to know

The Andalusian regional government has announced several major changes to its tax laws which come into force in January 2022, affecting everything from personal income tax to inheritance tax. Here’s what you need to know.

Taxes in Andalusia in 2022.
Taxes changes in Andalusia. Photo: Frank Nürnberger / Pixabay

Andalusia’s tax reforms were passed in October 2020 and set out significant reductions in regional taxes from January 1st 2022, the date in which they came into force for taxpayers.

The changes will affect four of the main taxes which Andalusia has jurisdiction over.

These include Personal Income Tax (IRPF), Wealth Tax (Patrimonio), Inheritance and Donations Tax (ISD), and Property Transfer and Documented Legal Acts tax (ITPAJD).

The new laws also include an increase of the income limit threshold to benefit from tax deductions.

It will go from €19,000 per year to €25,000 for individual taxes while in the case of joint tax declarations, the bar will be raised from €24,000 to €30,000 in 2022.

READ ALSO: Andalusia unveils plans to become Spain’s least bureaucratic region

IRPF

One of the key changes in Andalusia’s tax laws will be in the category of personal income tax or IRPF.

In 2022, this will be reduced to the lowest rate of 9.5 percent, the minimum required by Spanish law.

This update brings Andalusia in line with other regions such as the Community of Madrid, which is famed for its low tax rates and gave the green light for the same change in December 2021.

READ MORE: Why you should move to this region in Spain if you want to pay less tax

The new regulation also raises the regional deduction for investment in first homes to five percent both for young people and for owners of officially protected homes.

In addition, the law will also improve deductions on rent for various groups, including people with disabilities, those over 65 as well as victims of domestic violence or terrorism. The limit will be €25,000 for individual taxation and €30,000 for joint taxation.

The tax benefits related to births and adoptions will also increase. Deductions of up to €200 can be made, which is four times more than previously allowed. In the case of families living in depopulated areas, the threshold will be increased to €400. Greater reductions will also be available for large families, those needing domestic assistance and those with disabilities.  

Two new exceptions have also been created –  one to offset educational expenses with a limit of €150 per student and another for donations that have an environmental purpose. 

READ ALSO: Why you should move to this region in Spain if you want to pay less tax

Wealth Tax

Another of the changes affects the souther region’s Wealth Tax, which has been lowered for people with disabilities.

The Andalusian government has raised the limit to €1.25 million, which is almost double compared to the €700,000 which was exempt for people with a degree of disability between 33 and 65 percent up until now.

Taxpayers who exceed the 65 percent disability threshold will be exempt from this tax as long as they do not have assets above €1.5 million. 

Inheritance Tax 

The changes also include the reduction of Inheritance and Donation Tax in Andalusia. Rates have been reduced to between 7 and 26 percent in 2022.  

According to the Andalusian government’s calculations, the combination of the rate and the coefficients will mean that the marginal tax rate will not exceed 45 percent.

Up until now, it could reach up to 70 percent. This measure will especially affect family groups including brothers and sisters, cousins, nieces and nephews, and aunts and uncles.

There will also be a reduction in the tax base for first homes or habitual residences, after a death, or by donating to descendants with a disability.

The base rates that apply to companies and businesses will also be reduced.

Property Transfer Tax

The Andalusian Government has also agreed to maintain the reductions that were already being applied to the Property Transfer or Transmission Tax. The general rate will remain at 7 percent, while notarial documents will be taxed at 1.2 percent. This has been in operation since the end of April 2021.

Offspring under 35 years of age, large families or people with disabilities will also benefit from a reduced rate of 3.5 percent. But in 2022 there will be an increase in the maximum value of the home on which it is transmitted, so there is a little more margin, depending on the group to which they belong.

A reduced tax rate of 6 percent on the acquisition of homes with a value of €150,000 or below will also be introduced in 2022. This will be open to anyone living in Andalusia, without any other additional requirement.  

A one percent reduction in tax will also be applied to the purchase of non-polluting vehicles. 

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Q&A: How will Spain’s new social security system for the self employed work?

The Spanish government announced new tax rates for the self-employed from 2023, but many "autónomos" are confused as to exactly how it will work in practice. Here's everything you need to know, to help you understand better.

Q&A: How will Spain's new social security system for the self employed work?

From 2023 Spain’s autónomos will pay monthly social security fees based on “real earnings” in a similar way to how it works for income tax. The Spanish government revealed the new rates at the end of July 2022. 

The changes mean that rather than there being a fixed minimum contribution base of €294, self-employed workers will pay different monthly amounts based on how much they earn. It will go from €200 a month for lower earners to €590 a month for higher earners.

READ ALSO – CONFIRMED: Spain’s new tax rates for the self-employed from 2023 onwards

However, many of those who are self-employed are confused by the new rules and have many questions regarding exactly how much they’ll be paying from next year. 

Here are some of the most common questions asked and the answers, which are based on an interview with Social Security Minister José Luis Escrivá on radio station Cadena Ser. 

Q: When will the new system come into effect?

A: Autónomos will start paying the new social security quotas from January 1st 2023.

Q: How will I know what income bracket I will be put into?

A: At the beginning of the year, each autónomo will have to state their expected income level using a special tool called ‘importas’ or imports. This will help you calculate how much you might potentially earn during the year. You will be able to modify and change your income bracket six times per year, based on your real earnings. At the end of the year, you will find out what your final real earnings are and your fee will be adjusted accordingly.

READ ALSO: Will you pay more under Spain’s new social security rates for self-employed?

Q: Does that mean I will get my social security back if it turns out Ive paid too much?

A: Yes, essentially like the income tax, you will be paid part of your social security fee back again if it turns out you’ve paid too much. On the other hand, it also means that you will also have to pay more social security if you have paid too little.

Q: How will the new system work if I only work sporadically?

A: As mentioned above, you will be able to change your expected income every two months. This means those with seasonal work will end up paying less in social security fees than they do now, during the months when they get less work. When you begin to earn more, you can change your expected income level again and will be charged more.

Q: What will happen to the tarifa plana or flat rate scheme whereby new autónomos start out paying only €60 per month in social security fees?

A: The tarifa plana as it stands currently will end and those on it will not continue paying the same amount. Instead, new autónomos will pay a flat fee of €80 per month for the first year and will continue at this rate in year two, only if they earn below minimum wage. Low earners, those who earn less than €670 per month will see their rate reduced to €230 in 2023, €225 in 2024 and €200 in 2025.

Q: What will happen if I have to close my business for some reason, do I have to de-register completely?

A: The new law now states that if you are forced close your business partially or temporarily, such as in the case of the volcano eruption in La Palma, you now don’t have to deregister completely from the autónomo system. Those who have to partially close their business will be able to apply for financial help, even if they do not close completely.

Q: Why is there such a big difference between the social security rate in Spain and other European countries?

A: According to Escrivá, Spain is one of the countries with the highest level of protection for self-employed people in Europe. In other countries, you may pay less in social security fees, but will not get pensions, sick pay, maternity or paternity benefits, he explained. It also means you have aid benefits during a crisis such as the Covid-19 pandemic or if you own a shop on a street that has to be closed for construction, for example.

Q: How will we know if the new changes will be successful or not?

A: These reforms essentially mean higher pensions for the self-employed, as well as higher and better benefits. When autónomos start benefitting from these, then we know that it is successful, said Escrivá. 

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