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Spain’s Valencia region lowers income tax for yearly earnings under €60K

Valencia's regional president has announced a reduction in income tax for the vast majority of taxpayers as part of a series of reforms that include free transport and other tax benefits for residents of the eastern Spanish region.

spain valencia region income tax reduction
According to Puig, taxpayers in Valencia will save €111 on average this year. Photo: José Jordan/AFP

Valencian regional president Ximo Puig announced on Tuesday September 27th a series of financial reforms intended to make tax outcomes in the coastal Spanish region more progressive.

The headline grabbing reform is a reduction in income tax rates for those earning under €60,000 gross a year, something that benefits 97.4 percent of Valencian taxpayers (1.34 million workers).

The new income rates will be retroactive and apply to earnings from January 1st 2022, thus reflecting on the 2022 annual income tax declaration carried out next year.

“Incomes of €10,000 will save 21 percent (around €94.5),” Puig explained, and “those of €20,000 will save 7.3 percent (€117). Those of €30,000 will save 2.2  percent, or €67.”

Spain’s Personal Income Tax (IRPF) is a state tax, but half of its collection is controlled by the autonomous communities.

As such, each region can change its income tax brackets, like Puig has on Tuesday, and the reductions he has announced will apply to the 50 percent of IRPF collected by the Valencian regional government – it does not represent a reduction in the overall income tax rate.

Valencianos with incomes over €60,000 will not see any change to their income tax.

During his announcement, Puig gave the example of a young single person under 35 earning €28,000 and paying €8,000 on their mortgage who will pay €530 less in their next tax return.

According to the calculations from the Ministry of Finance, a couple who have an 80-year-old dependent relative, earn €30,000 and file a joint tax return would reduce their net regional tax liability by €162.

It is worth noting that that Generalitat is yet to formalise the reforms in writing, so the specifics (and savings) are not yet 100 percent clear. 

Reform measures

The reduction in income tax was announced alongside two other major policies: an increase in tax-exempt minimums, and increases to tax deductions.

The tax-exempt threshold for earnings will be increased by 10 percent for both personal and family incomes, taking it up to €6,105, allowing 33,000 low-income Valencia residents to not pay income tax.

According to Puig, taxpayers in Valencia will save €111 on average this year.

The politics of inflation

Describing the reforms as ‘progressive’ not ‘elitist’ in what many in the Spanish media have interpreted as criticism of the recent People’s Party tax reform across Spain, including in Madrid led by Isabel Díaz Ayuso, and the slashing of a wealth tax in Andalusia, Puig, leader of PSOE in Valencia, claimed his changes will benefit “families with lower income” and improve “the redistribution of wealth” in the region.

READ MORE: Spain’s Andalusia to scrap wealth tax in bid to attract high earners

“That’s the difference, ladies and gentlemen,” Puig said, “here we keep the wealth tax, a tax for which only 0.5 percent of Valencians are taxed… those who have a wealth of more than half a million euros.” 

Mortgages

The reforms also included a tax deduction of €100 for some mortgages, and a promise to build 1,090 new homes on public land in the Valencian Community.

Transport changes

Puig also announced that Valencian public transport (including all metro, tram and bus services) will be free for children and young people under 30 years old from October 9th until the end of the year.

The measure will benefit around 1,553,000 young people across the region and save them €135 each.

Fertility tax deduction

A tax deduction for fertility treatments for Valencian women who cannot be treated in the public health system for reasons of age or low probability of pregnancy was also announced as part of the tax reforms.

READ MORE: How Spain’s politicians are waging a tax war ahead of 2023 elections

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VALENCIA

Spain’s Valencia named best city in the world for foreign residents

Valencia has been voted the world's best city to live in if you're a foreign resident, ranking top for its quality of life, leisure opportunities and ease of settling in, a new survey by Internations has found. 

Spain's Valencia named best city in the world for foreign residents

If you’re planning on moving to the city of paella, futuristic architecture and crazy fire festivals, or you’re already a resident there, you’ll be pleased to discover that Valencia has been voted number one out of 50 cities worldwide as the best city for “expats” to live in.

Spain’s third-largest city beat the likes of Dubai, Mexico City, Lisbon, Bangkok, Basel, Melbourne, Abu Dhabi and Singapore, which all made up the top 10 spots in the survey by Internations, one of the biggest foreign resident communities with over 4.5 million members. 

The best and worst cities for “expats” in 2022 according to Internations’ survey.

Madrid and Barcelona were also listed in the top 20 cities, with Madrid coming in at number five and Barcelona just missing out on the top 10 at number 14.

All of the Spanish cities on the list did very when it came to quality of life, culture and leisure, as well as cost of living and ease of settling in, but ranked poorly when it came to bureaucratic matters and work.

READ ALSO – Moving to Valencia: A guide to the best neighbourhoods to live in

Valencia was voted top for its liveability, friendliness and affordability and also ranked number one in the “Quality of Life” index.

Foreign residents in Valencia loved the city’s travel infrastructure – 85 percent describe public transportation as affordable, compared with 70 percent globally. Valencia was also voted for the number of opportunities for recreational sports (92 percent happy vs. 75 percent globally). 

READ ALSO: How much does it really cost to live in Spain’s Valencia?

The city ranked highly for health and well-being as well due to affordable healthcare (coming in 2nd) and easy access to medical services. Furthermore, 92 percent of its foreign residents said that they feel safe there, compared with 81 percent globally.

valencia best city expats
Foreign residents in Valencia appreciate the city’s travel infrastructure, healthcare offering, safety and cost of housing. Photo: Jonny James/Unsplash

Valencia also scored well on affordable housing, coming in at number three, but received mixed results when it came to local bureaucracy.

READ ALSO: 11 Valencia life hacks that will make you feel like a local

By far the worst part about living in Valencia according to its foreign residents is the work situation. It ranked in at last place when it came to career prospects and 50 percent of foreign residents also rated the local job market badly, compared with only 27 percent globally.

READ ALSO: The downsides of moving to Spain for work

Overall, only 56 percent said they are happy with their job, which is below the global average at 64 percent. Although, it should be noted that only 8 percent of respondents said that they moved to Valencia for work-related reasons, compared to 36 percent globally.

The most popular reasons for moving to Valencia were a better quality of life and the plan to retire abroad.

As for Madrid, which came in at number five on the list and also scored highly for quality of life, foreign residents particularly loved the climate and weather (88 percent were happy with it vs. 62 percent globally). It also ranked well due to its travel opportunities (95 percent vs. 82 percent globally) and leisure activities, as well as culture and nightlife (90 percent happy vs. 67 percent globally).

The Spanish capital also did well when it came to cost of living and affordable housing, but again fell down when it came to bureaucracy and jobs. Around 22 percent said that moving to the city has not improved their career prospects.

Internations’ ranking of Spain’s three most highly rated cities: Barcelona, Madrid and Valencia.

Barcelona on the other hand ranked number 1 in the world for leisure, which included dining options, culture and nightlife (93 percent happy vs. 67 percent globally), but ranked below its neighbours when it came to safety and security, ease of settling in and finance. Despite this, 54 percent rated the cost of living positively, compared to 45 percent globally.

Barcelona also got fewer results for Local Friendliness coming in 22nd place out of 50.

Work and employment, however, was the biggest issue for foreign residents in Barcelona, similar to Valencia and Madrid. 30 percent believe that moving to Barcelona has not improved their career prospects (vs. 18 percent globally), and 22 percent feel that they’re not being paid enough. 

Last year, the Andalusian city of Málaga was voted the second-best city for foreign residents in the world by Internations members, but surprisingly isn’t even on the list this year. It scored highly for cost of living, making friends and socialising. 

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