We always say that in Spain the succession tax can vary a lot from one region to another. It seems that now this fact has been introduced in the political agenda. As a result, and with the majority of regions having elections later this year, we expect changes.
Andalusia has been one of the first. They had their elections few weeks ago, and now the new government has just approved a 99% allowance in this region’s succession tax.
Lowering the succession tax is very popular among the citizens and does not affect the public budget too much. It is a good way to show voters that the new government will do what they said that they were going to do.
The truth is that all the main parties agrees about these changes; the fight here is to be crowned as the one that finally introduced the reduction in tax. Removing or at least decreasing the succession tax is now a trend in Spain that only a big crisis could stop.
Until the change, the residents in Andalusia that inherit more than one million euros had to pay the tax. From now, not even they will have to pay it.
You may think someone inheriting one million euros is a rich person, and although we can’t deny it is a large amount, some of the heirs gather a big share of the amount in a property. Their liquid disposal is not so high, and for many, inheriting a good property means asking for a loan that implies the risk of losing the property.
With this change, the Andalusian government losses about 300 million euros yearly. So that you can have an idea about its importance, the budget for Andalusia in 2018 was 34,759,523,350 euros
The change also affects donations. Before the law modification, parents giving money to their children meant the children had to pay 8.5% or more of the donation. Now the rate has been decreased to just 1%.
Why Don’t They Just Remove the Tax?
After a 99% allowance, you may be wondering why they do not just remove the full tax. It’s all about being pragmatic.
The allowance means the tax is still there. If at any moment they need to recover the income from the tax, they just need to remove the allowance. If they remove the tax, when they want to have it working again they would need to create a full body law for it.
Besides, by taxing 1% they have control over money transfers. This is especially useful in fighting against money laundry. So even when they do not get many resources from the administrative process, they still get the intelligence value to fight against narcos and other illegal business.
More Regions Will Join
With the elections coming. The PP’s leader for Castilla y León has also announced his intent to remove the succession tax in the region if he wins.
Let’s see how this evolves in the full country in the next 10 months.