PSOE and C’s agree to raise inheritance tax threshold to 250,000 euros in Andalucía
The Junta de Andalucía is to raise the threshold for inheritance tax from 175,000 to 250,000 euros, so that people who inherit less than that amount from their parents or other direct relatives will not have to pay tax on it. The new regulation, which has been announced towards the end of the election campaign, will come into force in January and is the result of an agreement between the PSOE and Ciudadanos parties in the Andalusian parliament. It aims to benefit those with average or low incomes.
The political agreement includes other benefits, such as tax discounts when inheriting an habitual residence and the abolition of special conditions for agricultural businesses which are passed to spouses or children, or to workers who can prove they have been employed there for five years.
The two latter reforms will come into force this year, although the date is not yet known. When all these new regulations are in force, the Junta will lose about 125 million euros in income, according to its finance ministry. This year it expects to receive about 500 million euros from inheritance and gift taxes. These are national taxes which are delegated to the autonomous regions, who are entitled to set their own rates although the national government has the power to overrule or uphold them.
Until now, tax has been payable on any inheritance worth more than 175,000 euros in Andalucía, and if a direct relative inherits a single euro more than that figure, they have to pay tax on the whole amount.
This anomaly will be resolved after January because the Junta will give an additional reduction by not applying the tax to the first 200,000 euros for those who inherit assets or property worth between 250,000 and 350,000 euros. The PSOE rejected the idea of raising the level even further, due to the considerable sums involved.
As an example of the new minimum threshold of 250,000 euros, if two siblings inherit property with a value of 500,000 euros, at present they would each have to pay 38,875 euros in inheritance tax. After January, they will not have to pay anything.
If someone inherits 320,000 euros, at present they will have to pay 56,497 euros in tax but once the new regulation is in force their tax will be 13,068 euros (based on a taxable base of 120,000 euros), which is a reduction of 77 per cent.
With regard to the inheritance of agricultural assets, for example, if a 30 year old man inherits a farm worth 350,000 euros from his deceased father, at present he has to pay 64,147.81 euros and reductions can only be applied under certain conditions. From January, he will not have to pay anything.
Keeping farms in the family
Among these conditions, it has been stipulated that prior to their death, the person had personally, habitually and directly run the business and that it was their principal source of income. In the past, inheritance tax has caused a problem in cases where the business was not profitable, was very small or where the owner had retired.
The Junta is granting the reductions to encourage people to keep such businesses in the family, not only in agricultural companies but also other economic sectors in Andalucía. The new regulations will make it easier for agricultural assets to be handed down from one generation to another.
The agreement between PSOE and Ciudadanos includes a reduction in the tax base for property transfers from 100% to 95%, as long as the property in question is the main residence of the person who is inheriting it. The tax-free amount will rise from a real value of 122,606 euros to over 242,000. The beneficiary, descendent, ascendent, collateral relatives or those over the age of 65 must have lived with the person who has died for at least two years before their death.source surinenglish