According to European IFA firm Blevins Franks, a committee of tax experts is set to make a number of recommendations on how best to overhaul the Spanish tax system, which currently allows each region to set its own rates.
Currently, Madrid, the most densely populated region in Spain and one of the wealthiest, has much lower rates of tax than others, currently offering its residents 100% relief from a previously abolished 2.5% annual wealth tax, restored in 2012, on worldwide assets valued over €10.6m (£9.03m, $11.3m).
Wealth tax
In its final report set to be published in August, the committee has proposed a new law to establish minimum and maximum wealth tax rates applicable to all the regions, where each Spanish region could then set an applicable rate within those brackets.
The proposals also revealed the possibility of applying a 100% allowance on the final wealth tax bill for all regions so that no wealth tax is payable at all, which currently applies in Madrid.
“While some experts have suggested the abolition of the wealth tax, this idea has not garnered enough support, so it seems unlikely that the wealth tax will disappear in the coming years in Spain,” confirmed Blevins Franks in a blog post on its website.
Succession and gift tax
Other measures under consideration include a new law setting the minimum and maximum succession and gift tax rates applicable to all the regions which again then be ultimately decided upon by the regions.
New tax rates of around 5% may also be introduced for close relatives such as spouses as well as removing exemptions to the current gift tax regime.
Not finalised
Blevins Franks said the suggestions will benefit those individuals resident in the regions with the highest taxes such Andalucía.
“They will be detrimental for those living in regions with very low succession tax rates, like Madrid,” it added, warning that the proposals “are not binding” and still need approval.
“For example, a previous tax experts committee was appointed in 2014 to help the Spanish government with the major 2015 tax reform.
“The report of this committee (Informe Lagares) suggested, amongst other recommendations, that wealth tax should be abolished. However, the proposal has not been followed and wealth tax remains applicable in Spain,” said the firm.
‘Tax dumping’
The committee’s suggestions come amid mounting pressure on the Spanish government in recent years to harmonise the “substantial tax disparities” across the country.
At a conference with regional leaders in January, prime minister Mariano Rajoy, was lobbied by Andalucía, the Southern-most region of Spain, to scrap the existing system to avoid “unfair competition” and “tax dumping” between the regions.
