Under is an excerpt of the 2025 Spanish Regional
Government Abstract
The Regional Tax Competitiveness Index (RTCI) for Spain permits policymakers, companies, and taxpayers to measure and consider their areas’ tax methods. This Index analyzes how properly areas construction their tax methods and serves as a street map for policymakers to reform their tax methods to make their areas extra aggressive and engaging for each entrepreneurs and residents.
The Index compares the 19 Spanish areas on greater than 60 variables in 5 main areas of taxation—particular person revenue taxA person revenue tax (or private revenue tax) is levied on the wages, salaries, investments, or different types of revenue a person or family earns. The U.S. imposes a progressive revenue tax the place charges enhance with revenue. The Federal Revenue Tax was established in 1913 with the ratification of the sixteenth Modification. Although barely 100 years previous, particular person revenue taxes are the most important supply, wealth taxA wealth tax is imposed on a person’s web wealth, or the market worth of their complete owned property minus liabilities. A wealth tax might be narrowly or extensively outlined, and relying on the definition of wealth, the bottom for a wealth tax can differ., inheritance taxAn inheritance tax is levied upon the worth of inherited property acquired by a beneficiary after a decedent’s loss of life. To not be confused with property taxes, that are paid by the decedent’s property primarily based on the dimensions of the overall property earlier than property are distributed, inheritance taxes are paid by the recipient or inheritor primarily based on the worth of the bequest acquired., switch taxes and stamp duties, and different regional taxes—combining the outcomes to generate a ultimate rating. The Index gives a easy metric to evaluate the entire tax system and determine strengths and weaknesses. The result’s a rating that may be in contrast throughout areas.
Primary Tax Traits
After the Spanish central authorities made everlasting the “solidarity wealth tax” for web property exceeding €3 million on prime of regional wealth taxes, a number of the areas that supplied 100% aid authorised a tax deductionA tax deduction permits taxpayers to subtract sure deductible bills and different objects to cut back how a lot of their revenue is taxed, which reduces how a lot tax they owe. For people, some deductions can be found to all taxpayers, whereas others are reserved just for taxpayers who itemize. For companies, most enterprise bills are totally and instantly deductible within the yr they happen, however ot for the distinction between the regional wealth tax legal responsibility and the solidarity wealth tax legal responsibility. This permits Andalusia, Cantabria, La Rioja, Madrid, and Murcia to retain the revenues the central authorities deliberate to gather whereas nonetheless providing aid to people with web wealth beneath €3 million. Extremadura selected to not implement this deduction, permitting the central authorities to gather any income from the residents in Extremadura with web wealth exceeding €3 million. Moreover, the Balearic Islands and the Valencia Group raised the exception threshold to €1 million.
Following earlier RTCI suggestions, quite a few areas reformed their inheritance taxes by providing 99 p.c tax aid for shut heirs, bringing the overall to 11 areas that provide this necessary tax aid. Many areas have additionally launched tax aid for various kinds of beneficiaries, together with extra distant family members. At present, Spain has the very best inheritance tax charge on the earth. For unrelated or distant heirs, the highest inheritance tax charge reaches 87.6 p.c, remodeling the inheritance tax right into a confiscatory measure. The aid supplied by many of the Spanish areas for shut heirs is motivated by the excessive inheritance tax liabilities that push taxpayers to deny inheritances by promoting property. Nonetheless, just like the wealth tax, the central authorities is seeking to introduce a new inheritance tax on prime of the present one or remove the deductions for shut heirs that almost all areas at present apply.
The 5 greatest areas on this yr’s Index are:
- Group of Madrid
- Biscay
- Alava
- Guipuzcoa
- La Rioja
What distinguishes the highest 5 areas from the remaining is their excessive rating in every of the 5 parts of the Index.
Madrid
Madrid stays within the prime place, however its rating worsened barely by 0.21 because the distinction with the opposite autonomous communities decreased. Following the 2024 RTCI suggestions, Madrid elevated its inheritance tax aid for extra distant family members. Madrid may additional enhance by chopping the highest inheritance tax charge from 34 p.c to 25 p.c and abolishing the issue that depends upon the extent of pre-inheritance wealth and familial closeness to the heir. Madrid may additionally enhance its rating by mechanically indexing the revenue tax to inflationInflation is when the overall value of products and companies will increase throughout the financial system, lowering the buying energy of a forex and the worth of sure property. The identical paycheck covers much less items, companies, and payments. It is typically known as a “hidden tax,” because it leaves taxpayers much less well-off on account of larger prices and “bracket creep,” whereas growing the federal government’s spendin (to keep away from bracket creep) and by chopping the tax charge for the primary revenue tax bracket by 0.5 proportion factors, to equal the one utilized in Extremadura and La Rioja.
Basque Nation
The variations among the many three Basque provinces are pushed by the wealth tax element of the Index. On the wealth tax element, Guipuzcoa ranks 17th, Alava 10th, and Biscay 8th. Moreover, in response to the solidarity wealth tax, the three Basque provinces authorised their very own solidarity tax to enhance the wealth tax that the three provinces have been already making use of. In 2025, Biscay, Alava, and Guipuzcoa additionally applied one of many RTCI suggestions: the online revenue allowance was elevated in order that taxpayers incomes the minimal wage would not pay revenue tax. This helped the provincial governments keep their place within the rating.
All three Basque provinces may gain advantage from reforming their inheritance taxes as they’re tied for 12th place on this element of the Index. Moreover, Guipuzcoa may enhance by elevating the wealth tax threshold to the extent utilized in Biscay and lowering the tax charge.
La Rioja
La Rioja improved three locations within the total Index from 8th to fiveth place. Following the 2024 RTCI suggestions, La Rioja authorised a tax deduction for the distinction between the regional wealth tax legal responsibility and the solidarity wealth tax legal responsibility. La Rioja may enhance its rating by lowering the highest revenue tax charge by 4 proportion factors and by mechanically adjusting all brackets and private and household deductions for inflation.
The 5 lowest-ranked areas on this yr’s Index are:
- Castilla La-Mancha
- Valencia Group
- Aragon
- Asturias
- Catalonia
The areas with the worst total scores get hold of low scores in nearly all of the parts of the Index and particularly within the three most necessary ones: revenue tax, wealth tax, and inheritance tax.
Catalonia
Regardless of reforming the revenue tax, Catalonia didn’t enhance its rating, rating final within the total Index. Positively, in 2025, policymakers diminished the tax charge of the primary revenue tax bracket by one proportion level, adjusted the decrease brackets for inflation, and streamlined the tax construction by lowering the variety of brackets to eight. Nonetheless, however, it restructured the property switch tax by introducing two extra tax bracketsA tax bracket is the vary of incomes taxed at given charges, which generally differ relying on submitting standing. In a progressive particular person or company revenue tax system, charges rise as revenue will increase. There are seven federal particular person revenue tax brackets; the federal company revenue tax system is flat. and elevating the utmost charge from 11 p.c to 13 p.c. It additionally launched a 20 p.c tax charge on the acquisition of residential properties by large-scale landlords and on transactions involving complete buildings.
Catalonia has twice as many regional taxes as the remainder of the Spanish areas and a number of the worst-structured particular person revenue, inheritance, and wealth taxes.
Asturias
Regardless of growing the generosity of the non-public revenue tax to help households with youngsters, Asturias nonetheless ranks 18th within the 2025 Index. Asturias would profit considerably from revenue and inheritance tax reform. Asturias has by far the very best inheritance tax legal responsibility among the many areas.
Aragon
Aragon has not undertaken any reforms this yr and remained in 17th place within the 2025 Index. Aragon has a number of shortcomings relating to revenue, wealth, and inheritance tax parts. Aragon must also repeal the 2 new regional taxes on wind and photo voltaic farms.
Valencia Group
Regardless of reforming the wealth tax and eliminating some regional taxes, the Valencia Group remained in 16th place. Valencia reformed the wealth tax by elevating the exemption threshold from €500,000 to €1,000,000. On the finish of 2024, Valencia repealed three regional taxes that have been set to take impact on January 1, 2025. Regardless of these reforms, Valencia nonetheless has a number of the most burdensome wealth taxes, switch taxes, and stamp duties in Spain. Nonetheless, sure reforms in switch taxes and stamp duties have already been authorised and are scheduled to take impact in July 2026. This might enhance Valencia’s rating subsequent yr. Moreover, Valencia’s total (central and regional) prime marginal revenue tax charge stands at 54 p.c, the fourth highest in Europe, after Denmark (55.9 p.c), France (55.4 p.c), and Austria (55 p.c).
Castilla-La Mancha
As a result of lack of tax reforms and the reinstatement of the water environmental levy, Castilla-La Mancha stays in 15th place.
2025 Regional Tax Competitiveness Index Ranks, Part Tax Ranks, and 2024-2025 Adjustments
Supply: 2025 Spanish Regional Tax Competitiveness Index
Notable Rating Adjustments in This Yr’s Spanish Regional Tax Competitiveness Index
Cantabria
Cantabria authorised a wealth tax deduction for the distinction between the regional wealth tax legal responsibility and the solidarity wealth tax legal responsibility, and improved its total rank from 12th to 10th place.
Balearic Islands
Regardless of the shortage of necessary reforms, on account of Galicia’s drop within the rating, the Balearic Islands improved its relative total rank from 13th to 12th place.
Galicia
Galicia launched each a vacationer tax and an offshore wind installations tax, and dropped two locations within the 2025 Index to 13th total. Nonetheless, Galicia additionally launched an inheritance tax allowance for extra distant family members.
Andalusia
The shortage of main reforms and the relative enchancment of each La Rioja and the Canary Islands led Andalusia to drop two locations within the 2025 Index to 7th total.
Extremadura
The shortage of reforms and the relative enchancment of La Rioja led Extremadura to drop one place within the 2025 Index to eightth place. At present, Extremadura is the one area that maintains 100% wealth tax aid no matter whether or not the solidarity tax applies or not. This permits the central authorities to gather any income from Extremadura’s residents with web wealth exceeding €3 million.
Castile and Leon
The shortage of reforms and the relative enchancment of Cantabria led Castile and Leon to drop one place to 11th within the 2025 Index.
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