People in Andalucía pay less taxes, but mostly those on higher incomes

The surprising finding has been revealed in a comprehensive review and breakdown of taxation practices in Spain by region

Cristina Vallejo

Malaga

Friday, 4 April 2025, 10:18

"Andalucía started 2019 as one of the regions with the highest level of taxation in Spain and yet the regulatory changes made since then have turned it into a region of low taxation." This is the summary given by Javier Cabeza de Vaca González, president of the tax commission for the Colegio General de Economistas, Spain's professional body for those licensed to work in finance, at the presentation of their report 'Panorama de la Fiscalidad Autonómica' (a review and breakdown of taxation practices in Spain by region).

What the Junta de Andalucía has done in the last five years is to lower the personal income tax rate (IRPF) as well as reducing taxation on inheritance and donations or gifts. Wealth tax has also been affected, with a 100% tax reduction in recent years, although this was repealed following the approval of the solidarity tax on large fortunes. The Junta has reintroduced the regional wealth tax to avoid having to apply the new, statewide tax. It has also reduced the tax burden on real estate transactions. "This strategy is not tax dumping, a misused expression that does not correspond to the legitimate exercise of fiscal autonomy. Andalucía has opted for reducing the tax burden and for competitiveness in tax matters," said Cabeza de Vaca.

Next up was Rubén Gimeno Frechel, technical secretary of REAF (the specialist tax advisors' branch of the aforementioned professional body of economists), who summarised how collection of all the main taxes has proceeded after the application of these measures. Firstly, personal income tax revenue has increased due to the pull of economic activity in the region. Wealth tax revenue is also up because taxpayers have been obliged to declare the regional tax due to the solidarity tax on large fortunes coming into play at state level. However, revenue from inheritance and donations or gifts has decreased, but he attributes this to the fact that it has only come down to a normal level following the record figures that were reached during the pandemic.

Meanwhile, Manuel Vázquez, secretary-general of finance within the Junta de Andalucía, who also took part in presenting this report on Tuesday in Seville, explained that taxation is "a source of migratory flows": "There are people who, depending on the taxes, decide to move their tax domicile to other regions." He continued: "In 2018, Andalucía was in fourteenth place for taxation; now, removing the foral regions [Basque Country and Navarre - not part of nationwide tax regime], we are the second best region for taxpayers after Madrid." He seemed satisfied with this state of affairs: "We are in a pretty good position. We have to have tax responsibility because we have to comply with the spending rule, with the fiscal rules, which means that we are studying the tax collection impact of the measures very carefully." In the short term, it doesn't look like there will be many important tax reduction measures of any significance: "Right now there is a situation of uncertainty because the fiscal rules have not been approved in the congress of deputies."

Yet tax decisions have not had the same impact on all citizens or residents. Starting with personal income tax (IRPF), the summary provided by Raquel Jurado Ibáñez, one of REAF's technical experts, is as follows: Andalucía more or less mirrors the national average in Spain, perhaps a little closer to the most expensive for paying tax but, as the taxpayer's individual income increases, their tax burden moves closer to the cheapest.

This was illustrated in the report with an example of an individual taxpayer, single, under 65 years of age and earning a variable monthly salary. Someone with an income of 20,000 euros pa has to pay 1,772 euros in IRPF in Andalucía, the same as in all the other regions of the national tax regime, that is, with the exception of the Basque provinces and Navarre where more is paid.

For incomes of 30,000 euros, Andalucía's taxpayers are the sixth highest with an IRPF of 4,864.25 euros. IRPF exceeds 5,000 euros in Catalonia and is close to 5,000 euros in Asturias, while in the Basque provinces and Madrid it ranges between 4,500 and 4,600 euros. So, Andalucía's taxpayers on an income of 30,000 euros pay 3.5% less than in the region where they contribute the most (Catalonia) and 7% more than in the region where they contribute the least (the three provinces of the Basque Country).

For incomes of 45,000 euros, Andalucía is also the sixth highest for IRPF. The tax bill is 9,414.53 euros, also around 3% lower than that of the most expensive region, still Catalonia (9,686 euros) and around 8% higher than where the least is paid, also still the Basque Country (8,729 euros).

For the next income tax bracket, that of 70,000 euros, Andalucía drops to tenth place: the 18,867.57 euros to be paid contrasts with the 19,439.26 euros paid out in Extremadura, the most expensive region for this income level, and with the 17,665.15 euros that Basque citizens contribute to the treasury. In Andalucía, therefore, people on these higher incomes pay 4% less than in the most expensive region and 5.6% more than in the cheapest.

Turning to incomes of 110,000 euros, Andalucía is back in sixth place, but bear in mind that the three Basque provinces are not included in the ranking because they have their own respective, independent tax regimes that also happen to be where the highest personal income tax is paid.

However, once we turn to incomes of 300,000 euros and above, this region falls to fifteenth position. Only in Galicia, Murcia, Castilla y León and Madrid do you have to pay less to the treasury in your income tax return. In Andalucía the income tax bill comes to 121,962.57 euros, 10% less than in the most expensive region, Valencia (135,814.37 euros), and 4.6% more than in the cheapest, Madrid (116,622.10euros).

A similar thing happens for taxpayers with an annual income of 600,000 euros: again, only in Galicia, Murcia, Castilla y León do they pay less. The bill in Andalucía comes to 262,632.85 euros, 11% cheaper than in the Valencian region (297,381.19 euros) and 4.5% more expensive than in Madrid, the most benevolent towards these income brackets (251,240.22 euros).

As a result, those in Andalucía on lower incomes pay practically the same as the majority of lower income taxpayers in Spain, while those with higher incomes have to pay lower contributions to the tax authorities than in most other regions.

What of the other taxes? With wealth tax, anyone in Andalucía with 800,000 euros - excluding 300,000 euros corresponding to the main residence - pays nothing under this tax (as is also the case in the Balearic Islands, Madrid, La Rioja, Cantabria, Extremadura, as well as Álava and Vizcaya), compared to more than 900 euros in Valencia.

Meanwhile, an estate of four million euros has a bill of 5,100 euros, the lowest in Spain with the exception of Extremadura, compared to almost 50,000 euros in the region of Valencia - the most expensive.

An estate of 15 million euros in Andalucía must pay 278,364 euros, a figure that is only lower in Extremadura (zero) and the three Basque provinces. Valencia is once again the most expensive region (362,201.57 euros).

Finally, the wealth tax on an estate of 40 million euros in Andalucía would be 1,153,000 euros, making it the cheapest region in Spain's common taxation system, only behind Extremadura, where this tax no longer exists but where the wealthiest are obliged to pay the state tax on large fortunes.

In Andalucía the wealth tax was 100% subsidised, but the Junta took the decision to reintroduce it so that the resources remain within the region, thereby preventing central collection by the state. The new solidarity tax on large fortunes was approved by central government in view of the disappearance for practical purposes of wealth tax in many regions, but this tax is nationally owned so could be spent outside the region.

As for inheritance tax, according to the example given in this taxation review document, in the case of a 30-year-old singleton inheriting assets worth 800,000 euros from their father, of which 200,000 euros correspond to the deceased's home, the tax payable in Andalucía is zero, as is the case in Galicia, Cantabria and the Balearic Islands. This is because, in practical terms, this tax has been stripped of all meaning as there is a 100% subsidy for estates worth up to one million euros and then it is 99% subsidised for estates over that amount. In other regions, the inheritance tax bill is practically symbolic too: it is less than 1,000 euros in the Canary Islands, Extremadura and Castilla y León. Yet in the most expensive region for inheritance tax, Asturias, it exceeds 100,000 euros and Aragon comes second with 50,000 euros.

Andalucía is also one of the regions in Spain where it is cheapest to make a donation or gift: if a person receives 800,000 euros in cash from one of their parents for no specific purpose, in Andalucía they will have to pay 1,716.20 euros (the tax between close relatives is subsidised at 99%). Only in Valencia and the Canary Islands would you have to pay less (1,710.13 and 200 euros respectively), while in Cantabria it would be free of charge. In contrast, in Extremadura such a donation would mean declaring to the tax authorities and receiving a bill that exceeds 200,000 euros.

Lastly, there are two taxes on special transactions: property transfer tax and the tax on stamp duty. The former tax in Andalucía has a rate of 7%, somewhat higher than in Madrid or Navarre (6%) or the Canary Islands (6.5%), but below the 13% that can be reached in some cases in the Balearic Islands. The second of these taxes in Andalucía is 1.2%, above the 0.5% applied in some other regions, but below the 1.5% charged in most regions of Spain.

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