New tax measures approved in Andalusia

On September 20, 2022, the Governing Council of the Regional Government of Andalusia approved Decree-Law 7/2022, amending Act 5/2021, of October 20, regulating taxes assigned in the autonomous region of Andalusia (“DL 7/2022”).

DL 7/2022 introduces two important measures concerning direct regional taxation: with regard to wealth tax (“WT”) it approves a 100% rebate of the total tax liability, and with regard to personal income tax (“PIT”), it regulates the deflation of the regional rate and the increase in minimum exempt amounts.

Full rebate on wealth tax

DL 7/2022 introduces a new article 25 bis in the act regulating taxes assigned in Andalusia, which provides for a regional rebate of 100% of the resulting WT rate after applying the deductions and rebates provided under state regulations.

This rebate practically eliminates WT.

This measure affects all taxpayers whose habitual residence is in the autonomous region of Andalusia and may also affect non-resident taxpayers that have assets and rights in Andalusia. Specifically, to benefit from the rebate, non-resident taxpayers’ assets and rights with greatest value and on which wealth tax is levied must be located in Andalusia.

This measure, despite initially affecting tax collection, seeks to produce a multiplier effect on PIT collection (partially granted to the autonomous regions) owing to the expected increase in national and foreign taxpayers that will establish their residence in Andalusia.

The full rebate on WT will apply from 2022, the tax return filing due date of which falls in June 2023.

However, note that under the WT Act, taxpayers whose assets and rights exceed the value of €2 million are obliged to file a tax return even if there is no tax due.

Deflation of PIT

This measure, which aims to mitigate the effects of inflation and the reduction of Andalusians’ purchasing power, is based on two new mechanisms:

> The first involves increasing by 4.3% the quantitative thresholds of the first three brackets of the regional rate (this excludes taxpayers whose net taxable income exceeds €35,200), so that taxpayers are not moved into a higher tax bracket owing to a salary increase resulting from the effect of the consumer price index.

> The second also involves increasing by 4.3% the personal and family exemptions (ascendants and descendants), the aim of which is to reduce the impact of the sharp rise in the cost of living on the amount spent on essential goods.

The marginal wealth tax rate applicable to the highest bracket remains at 47%.

The entry into force of this measure will have retroactive effects on the PIT return corresponding to the 2022 tax period, the filing deadline of which is June 30, 2023.

This measure benefits all taxpayers whose tax residence is located in Andalusia in 2022.

Finally, DL 7/2022 includes a provision aimed at providing greater flexibility to the deferrals and installments for the payment of taxes assigned in the autonomous region of Andalusia (collected by the regional tax authorities) to up to 12 years.