Is Andalusia A Tax Haven? Here’s What You Need to Know

Although Spain is a country with a central government, each of the 17 autonomous regions in the country have considerable autonomy and power. Each of the regional governments is responsible for their own education, health, culture and social services. They can also set their own tax laws. And compared with other regions in Spain, Andalusia is considered to be one of the most tax-friendly regions of Spain.

Here’s everything you need to know about the tax laws in Andalusia, and why the region is particularly attractive to foreign investors:

Understanding Andalusia’s Tax Laws

Since 2019, Andalusia have made several significant changes to their tax laws. This has resulted in many taxes in the region being either reduced, negated or suppressed. Many of these changes have been focused on promoting foreign investment in Andalusia, and this approach has worked. Capital growth from foreign investments have increased by an incredible 40% over the last five years.

This is only good news; foreign investments create jobs and wealth in regions. They have a general overall impact on society. One example of this is the Four Seasons hotel chain. Enticed by low taxes in Andalusia, they are investing over 650 million euros in Marbella. This has created 4,000 new jobs during the construction stage, and 750 permanent jobs when the hotels are completed.

So what are the tax laws that are enticing this kind of investment to Andalusia? And why is the region becoming the number one hotspot for property investment in Spain?

• Inheritance Tax Suppressed. In 2019, Andalusia suppressed inheritance tax to the point that people rarely pay this tax in the region anymore. This results in a significant saving for any one who inherits whilst living in Andalusia.
• Gift Tax Suppressed. At the same time as the suppression of inheritance tax, gift tax was also suppressed in 2019. This means that individuals in Andalusia rarely pay tax when receiving financial gifts from family members.
• Property Transfer Tax Slashed. In 2021, property transfer tax was reduced as a temporary measure during the coronavirus pandemic. However, this change was so effective that it has been made indefinite. The consequence is that when buying a property, you can now make tax savings of from 15% to over 30%. The higher the asking price of the property you buy, the more savings you will make.
• Stamp Duty Reduced. Another reduction that made property in Andalusia particularly attractive to foreign investors was the reduction of stamp duty. This was reduced by 20%, to 1.2% of the asking price, for anyone buying a newbuild property.

• Wealth Tax Suppressed. In 2022, Wealth Tax in Andalusia was also suppressed. This has had a huge impact on the number of wealthy, affluent families choosing to live in Andalusia. In fact, the number of these families living in the country has grown considerably since Andalusia awarded itself low-taxation status.

What is clear is that a trend of lowering or suppressing taxes in Andalusia has been well established. This is not only attracting the attention of other Spanish autonomous communities, but also of foreign investors hoping to get the most possible bang for their buck.

These aren’t the only tax benefits of choosing to move to Andalusia. If you work remotely then you can also apply for a Digital Nomad visa, which will enable you to live and work in the region whilst paying  no tax on assets or money held abroad and simultaneously pay little to no tax (or no tax at all) on assets and income located in Andalucia. It’s an incredibly attractive proposition for digital nomads and remote workers alike.

By reducing taxes, the lawmakers in Andalusia have played a hands-on role in creating jobs, managing companies, and in wealth both for their citizens and for the private sector. Whilst Andalusia may not be a tax haven, it is operating in a similar way and as a result it is attracting investments and creating jobs.

Are you thinking of living and working in Spain? Does the idea of a nomadic lifestyle appeal to you? Or perhaps you’re just looking for somewhere with low taxes where you can lay down roots? Whether you dream is to buy or rent a property in Spain, our local property experts are perfectly placed to help you find the home of your dreams. Get in touch today to find out more about how we can help you.