February 26, 2021

Everything you need to know about the tax increase in Madrid




The negotiation of the General State Budgets has once again put the taxation exercised by the Community of Madrid on the table. Specifically, ERC accuses the Madrid region of perform “tax dumping” with its low tax policy. A situation that aims to change by taking advantage of the Government’s need to carry out public accounts with the greatest number of support. Thus, yesterday the Executive promised to end the low tax policy practiced by Madrid by creating a specific working group for the reform of the wealth tax on large fortunes.

Despite the agreement started by the Catalan independence party, the Ministry of Finance already had a plan that would end up raising taxes in Madrid. Thus, the portfolio led by María Jesús Montero has been trying for months to address a tax harmonization.

It must be remembered that Catalonia is the community that plus own taxes account, while Madrid is the one that, in general, has the lowest tax burden among its taxpayers. Specifically, in the wealth tax, which is the first that seems to be upset, the Madrid region has it 0% exempt. A type that the municipalities of Vizcaya and Álava also have. Thus, a taxpayer with a fortune of 800,000 euros will pay 1,164 euros if he is Aragonese, 769.5 euros if he is Catalan and 0 euros if he is from Madrid, Biscay or Alava.

The Community of Madrid totally rejects the harmonization of taxes. According to the CAM, this would cost Madrid taxpayers a total of € 5.9 billion. This harmonization would include taxes on wealth, inheritance and donations, documented legal acts, transfer of assets and the autonomous section of personal income tax. “If the central government wants to force us to do so, it will not only have us in front of it but also the more than three million Madrid taxpayers who have saved 48,000 million euros in the last 16 years thanks to the Community’s fiscal policy from Madrid ”, explained at the beginning of November the Minister of Finance, Javier Fernández-Lasquetty.

Personal income tax, donations, inheritance …

As for the differences between communities in other taxes, there are also notable differences. For example, in the personal income tax for the lowest incomes they pay more in the Basque Country, while it is in Madrid where they do less. A fact that changes as the section changes. Thus, the Basque region is where the least is paid for rents of 20,000 to 110,000 euros. For its part, Navarra is where high rents pay the most, while Madrid has the lowest personal income tax.

In inheritance tax, Asturias is the community with the highest tribute: a 30-year-old bachelor who inherits 800,000 euros from his father, of which 200,000 are from the deceased’s home, pays 103,135 euros compared to the 0 euros that I would pay in Andalusia, Cantabria and Galicia. In Castilla y León, it would allocate 81,018 euros while in the Valencian Community it would pay 63,193.7 euros.

Regarding the donation tax, Castilla y León and Extremadura are the regions that have it the highest. If instead of an inheritance, in the previous case the father donates 800,000 euros in cash to his 30-year-old son, in both regions he will pay 200,122 euros in taxes compared to zero euros in Cantabria, or 2,000 in Madrid, Andalusia and Murcia.

What taxes are going to increase in Madrid?

The Government proposes a harmonization of the wealth tax for all of Spain, a tribute that since 2008 the Madrid Community (in addition to the Basque Country) has been rewarded 100%. As explained by Fernando Santiago, president of the College of Administrative Managers of Madrid, the unification of this tax only has “a confiscatory desire” considering that this section is already paid in rent. Regarding family partnerships within this tax, ERC has requested in its amendment to the Budgets that the minimum participation of each family member goes from 5% (it was not taxed with a smaller participation in all of Spain) to 20%.

ERC has also asked that the inheritance tax. As for this tribute, Madrid is one of the communities that pays the least. Namely, in the case of receiving an inheritance of 800,000 euros, the amount to be paid by each Madrilenian is 1,586 euros.

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