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TAXES

The new tax laws in Spain’s Andalusia in 2022: What you need to know

The Andalusian regional government has announced several major changes to its tax laws which come into force in January 2022, affecting everything from personal income tax to inheritance tax. Here’s what you need to know.

Taxes in Andalusia in 2022.
Taxes changes in Andalusia. Photo: Frank Nürnberger / Pixabay

Andalusia’s tax reforms were passed in October 2020 and set out significant reductions in regional taxes from January 1st 2022, the date in which they came into force for taxpayers.

The changes will affect four of the main taxes which Andalusia has jurisdiction over.

These include Personal Income Tax (IRPF), Wealth Tax (Patrimonio), Inheritance and Donations Tax (ISD), and Property Transfer and Documented Legal Acts tax (ITPAJD).

The new laws also include an increase of the income limit threshold to benefit from tax deductions.

It will go from €19,000 per year to €25,000 for individual taxes while in the case of joint tax declarations, the bar will be raised from €24,000 to €30,000 in 2022.

READ ALSO: Andalusia unveils plans to become Spain’s least bureaucratic region

IRPF

One of the key changes in Andalusia’s tax laws will be in the category of personal income tax or IRPF.

In 2022, this will be reduced to the lowest rate of 9.5 percent, the minimum required by Spanish law.

This update brings Andalusia in line with other regions such as the Community of Madrid, which is famed for its low tax rates and gave the green light for the same change in December 2021.

READ MORE: Why you should move to this region in Spain if you want to pay less tax

The new regulation also raises the regional deduction for investment in first homes to five percent both for young people and for owners of officially protected homes.

In addition, the law will also improve deductions on rent for various groups, including people with disabilities, those over 65 as well as victims of domestic violence or terrorism. The limit will be €25,000 for individual taxation and €30,000 for joint taxation.

The tax benefits related to births and adoptions will also increase. Deductions of up to €200 can be made, which is four times more than previously allowed. In the case of families living in depopulated areas, the threshold will be increased to €400. Greater reductions will also be available for large families, those needing domestic assistance and those with disabilities.  

Two new exceptions have also been created –  one to offset educational expenses with a limit of €150 per student and another for donations that have an environmental purpose. 

READ ALSO: Why you should move to this region in Spain if you want to pay less tax

Wealth Tax

Another of the changes affects the souther region’s Wealth Tax, which has been lowered for people with disabilities.

The Andalusian government has raised the limit to €1.25 million, which is almost double compared to the €700,000 which was exempt for people with a degree of disability between 33 and 65 percent up until now.

Taxpayers who exceed the 65 percent disability threshold will be exempt from this tax as long as they do not have assets above €1.5 million. 

Inheritance Tax 

The changes also include the reduction of Inheritance and Donation Tax in Andalusia. Rates have been reduced to between 7 and 26 percent in 2022.  

According to the Andalusian government’s calculations, the combination of the rate and the coefficients will mean that the marginal tax rate will not exceed 45 percent.

Up until now, it could reach up to 70 percent. This measure will especially affect family groups including brothers and sisters, cousins, nieces and nephews, and aunts and uncles.

There will also be a reduction in the tax base for first homes or habitual residences, after a death, or by donating to descendants with a disability.

The base rates that apply to companies and businesses will also be reduced.

Property Transfer Tax

The Andalusian Government has also agreed to maintain the reductions that were already being applied to the Property Transfer or Transmission Tax. The general rate will remain at 7 percent, while notarial documents will be taxed at 1.2 percent. This has been in operation since the end of April 2021.

Offspring under 35 years of age, large families or people with disabilities will also benefit from a reduced rate of 3.5 percent. But in 2022 there will be an increase in the maximum value of the home on which it is transmitted, so there is a little more margin, depending on the group to which they belong.

A reduced tax rate of 6 percent on the acquisition of homes with a value of €150,000 or below will also be introduced in 2022. This will be open to anyone living in Andalusia, without any other additional requirement.  

A one percent reduction in tax will also be applied to the purchase of non-polluting vehicles. 

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LIFE IN SPAIN

Why you should think twice about buying a car in Spain, even if it’s second hand

A combination of supply and demand problems caused by the pandemic and a lack of microchips is making cars much harder to come by in Spain. Here's why you should perhaps consider holding off on buying that vehicle you had in mind for now.

Why you should think twice about buying a car in Spain, even if it's second hand

Getting your hands on a car – new, second hand, or even rental – is becoming much harder and more expensive in Spain.

The car industry has been hit by a perfect storm of conditions that have made new cars harder to come by and, as a result, caused prices to rapidly increase. 

According to Spain’s main consumer organisation, Organización de Consumidores y Usuarios (OCU), the microchip crisis affecting the entire globe, combined with an overall increase in the price of materials needed for car manufacturing and increased carbon emissions legislation has created a shortage of new cars in the country.

New cars

With less cars being manufactured, prices of new cars have gone up: a recent OCU report reports that new car prices have increased by 35 percent, higher even than Spain’s record breaking inflation levels in recent months. 

READ ALSO: Rate of inflation in Spain reaches highest level in 37 years

It is a shortage of microchips and semiconductors – a global problem – that has caused car production in Spain to plummet. In the first eight months of 2021, for example, production fell by 25.3 percent compared to 2019.

This is not a uniquely Spanish problem, however. The entire world is experiencing a shortage of semiconductor microchips, something essential to car manufacturing as each car needs between 200 to 400 microchips.

France’s car exports, for example, have fallen by 23.3 percent, Germany’s by 27 percent, and the UK’s by 27.5 percent.

Simply put, with less cars being produced and specialist and raw materials now more expensive, the costs are being passed onto consumers the world over.

Equally, these industry-specific problems were compounded by the COVID-19 pandemic.The average wait for a car to be delivered in Spain is now around four months, double what it was before the pandemic, and depending on the make and model you buy, it can be as long as a year.

Car dealerships across Spain were forced to sell cars during the pandemic to stay afloat, and now, when consumers want to purchase new cars, they don’t have enough to sell and can’t buy enough to keep up with demand due to the materials shortages that have kneecapped production.

Second-hand cars

With the scarcity and increased prices in the new car market, the effect is also being felt in the second-hand car market too. With many in Spain emerging from the pandemic facing precarious financial situations, then compounded by spiralling inflation in recent months, one would assume many would go for a cheaper, second hand option.

Yet, even second-hand prices are out of control. In Spain, the price of used cars have risen by 17 percent on average so far in 2022.

Cars 15 years old or more are 36 percent more expensive than they were in the first half of last year. The average price of a 15 year old car is now €3,950 but in 2021 was just €2,900 – a whopping increase of 36 percent.

As production has decreased overall, purchases of used models up to three years old have declined by 38.3 percent. Purchases of cars over 15 years old, on the other hand, have surged by 10.4 percent.

If you’re looking to buy a second-hand car in Spain, keep in mind that the reduced production and scarcity of new models is causing second-hand prices to shoot up.

Rental cars

These problems in car manufacturing have even passed down to car rentals and are affecting holidaymakers in Spain.

Visitors to Spain who want to hire a car will have a hard time trying to get hold of one this summer, unless they book well in advance and are willing to fork out a lot of money.

Over the past two years, since the start of the Covid-19 pandemic, there has been a shortage in rental cars in Spain. However, during peak holiday times such as Easter, the issue has been brought to the forefront.

It’s now common in Spain to see car rental companies hanging up signs saying “no hay coches” or no cars, similar to the no vacancy signs seen in bed & breakfasts and hotels.

READ ALSO: Why you now need to book a rental car in advance in Spain

While all of Spain is currently experiencing car rental shortages, the problem is particularly affecting areas of Spain with high numbers of tourists such as the Costa del Sol, the Balearic Islands and the Canaries.

According to the employers’ associations of the Balearic Islands, Aevab and Baleval, there are 50,000 fewer rental cars across the islands than before the pandemic.

In the Canary Islands, there is a similar problem. Occupancy rates close to 90 percent have overwhelmed car rental companies. The Association of Canary Vehicle Rental Companies (Aecav) says that they too have a scarcity 50,000 vehicles, but to meet current demand, they estimate they would need at least 65,000.

According to Spain’s National Statistics Institute (INE), fewer than 20 million foreign tourists visited Spain in 2020 and revenues in the sector plummeted by more than 75 percent. While numbers did rise in 2021, the country still only welcomed 31.1 million foreign visitors last year, well below pre-pandemic levels and far short of the government’s target.

Many Spanish car rental companies have admitted that the fleet they offer is down to half after selling off vehicles in the pandemic due to the lack of demand.

End in sight?

With the microchip shortage expected to last until at least 2023, possibly even until 2024, it seems that the best course of action if you’re looking to buy a new or used car in Spain is to wait, let the market resettle, and wait for prices to start going down again.

If you’re hoping to rent a car when holidaying in Spain, be sure to book well in advance.

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