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Tax reductions in Andalucía

In April 2019 the modification of “Inheritance and donation tax” in Andalucía was implemented.

The main difference between inheritance and donations is that the former occurs after the transferor has died and the latter takes place whilst the donor is still alive.

Before the tax modification, Andalusia used to have one of the highest inheritance and donation tax in Spain. Now, it is one of the cheapest.

The donations from parents to children are the main beneficiaries of the recent 99 % tax reduction. Andalusian parents, children, spouses and grandchildren who receive donations will only have to pay 1% tax, instead of 8,5% or more.

For example: If a father would have donated 8.000 Euros to his son under the old law, he would have had to pay 8,5% tax to the state (680 Euros).  If he would have donated 15.980,91Euros, the tax would have been at 9,35% (1.290,43 Euros).

Under the new rules, he will only have to pay 6,80 Euros in the first case scenario and 12,90 Euros in the second case scenario. This is a great benefit for the taxpayer.

However, do not get excited, as conditions apply!!! The Law modification leaves siblings, nephews and nieces, uncles, aunts and cousins behind. They will all still have to pay the same tax rate as before.

According to an estimate made by the Andalusian Ministry of Finance earlier this year, the drop in tax collection could be around 38 million Euros. They believe that as a result of the 99% tax reduction more donations will be reported legally which is something that did not happen until now due to the earlier tax rates. The total savings for the Andalusian taxpayer between 2019 and 2021 will be up to 42,5 million Euros.

As far as inheritance Law is concerned, the first 1.000.000 € inherited by spouses, children, parents and grandchildren is tax exempt.  Before the modification, only the first 250.000 € was exempt.