Property taxes bring Spain to the highest level of property tax of any developed country. Spain already reaches the Italian level, traditionally the Organization for Economic Co-operation and Development (OECD) country with the highest tax burden on property. Last year’s tax reforms push Spain’s tax system three more places in the property tax ranking of the International Tax Competitiveness Index 2021 prepared by the Tax Foundation.
Connoisseurs of thinking group Americans come to this conclusion after measuring and comparing the tax base and the amount of property taxes. In addition, investigate whether countries apply other types of property taxes. In the case of Spain, almost unique in the study, tax specialists underline how wealth tax, inheritance and gift taxes, taxes on real estate transfers, taxes on social assets, rights in capital or taxes on financial transactions. “Although this is an important element in measuring the neutrality and competitiveness of a country’s tax code, property taxes represent on average less than 5% of tax revenues total in European OECD countries, ”says Daniel Bunn, vice president of global projects at the Tax Foundation and expert in European tax policy.
The list of Spanish taxes that affect accommodation is the longest of all countries of the OECD. Properties are subject to income tax charged to the owner for second homes, wealth tax, non-resident income tax for rent, annual property tax (IBI) , to the inheritance and gift tax, to the tax on patrimonial transmissions and to the tax on the Increase in the Value of Urban Land, the so-called municipal surplus.
This situation weighs on the tax competitiveness of the real estate sector in Spain compared to the rest of the developed countries. “Spain has several property taxes that they distort with separate liens on transfers of real estate, equity, inheritances and financial transactions, ”says the Tax Foundation report.
The CCAA succeeds in reducing the tax burden thanks to its exemption and bonus policies for some of these taxes
However, this situation is mitigated thanks to the taxation of autonomous domains. In Spain, some autonomous communities offer reductions and exemptions from these taxes.
The case with the most tax assistance for housing is that of the Community of Madrid. The region benefits from a 100% wealth tax subsidy. In addition, in the Community of Madrid, the taxpayer pays only 1% of the tax corresponding to the tax levied on inheritance and donations between parents and children; also between spouses and domestic partners.
Furthermore, IChildren under 30 can apply in Income Tax a 30% deduction sums intended for rental, up to a limit of 1,000 euros per year.
Tax policies like these in the Autonomous Communities mean that the tax pressure indicator is not skyrocketing even more. “Spain has a territorial taxation which exempts from tax both foreign dividends and income from capital gains ”, underlines the report of the Tax Foundation.
On the other side of Spain is Estonia, the country with the lowest housing taxes. The country has the most efficient property tax system among OECD countries. Estonia’s property tax only applies to the value of land, making it one of three OECD countries – along with Australia and New Zealand – that exclude from the tax base the value of buildings or structures in the land. Estonia does not apply any other type of property tax covered by the International Tax Competitiveness Index.
Italy, on the other hand, is the worst in the property tax component of the index. In addition to relatively high property tax collections, Italy imposes a wealth tax on financial assets and property held abroad, and levies inheritances, real estate transfers, issuance of shares and the transactions. financial
Spain would occupy its place in the absence of exemptions and discounts for the regions. It is the country with the most figures to tax the fortune of the entire European Union. It is the only Member State which has a wealth tax. In addition, it includes in its tax regulations Successions and Donations, which – although more frequent in the community – keep the highest level with rates of up to 81.6%.
A recent report by the Tax Foundation describes the extent to which OECD countries depend on various sources of tax revenue. In 2019, property taxes represented on average only 4.5% of tax revenue in the 27 European OECD countries.
The UK is the most dependent on property taxes in 2019, accounting for 12.4% of total tax revenue. They are followed by Luxembourg and France, with 9.7% and 8.9% respectively. Estonia is the least dependent on these taxes, with only 0.6%.