THE DIFFERENT REGULATION IN THE AUTONOMIC TAXES PROVOQUE CHANGES IN RESIDENCY

It is commonly known that in Spain the management, collection and regulation of certain aspects of different taxes are transferred to the Autonomous Communities. That is the case, for example, of the inheritance and gift tax (IGT), the Wealth Tax (WT) and some of the collection of Personal Income Tax (PIT).
The amounts to be paid in some of the Autonomous Communities are so significant that many people have not hesitated to change their place of residence or to make donations to avoid or reduce tax payments in the future. For example, a child who receives a donation from his father amounting to 200.000 Euros, should pay more than 31,000 Euros for the IGT in Asturias. However, if the child resided in Madrid, he would only pay 310 euros approximately for the same tax.
These overwhelming differences are causing movements between regions. Asturias, Murcia, Andalusia, Extremadura, Canary Islands and Castilla y Leon are the Communities which have higher taxes, against Madrid, La Rioja and Cantabria, which have regulated reductions in donations and inheritances between parents and children. These more benevolent Communities are those that are "welcoming" the majority of people changing residency.

The very substantial differences in taxation between Autonomous Communities are causing movements of people from one to another

However, this tax system with such substantial differences may be at the end of its days. The Lagarde report, which was published following a request by the Government to a group of experts, recommended harmonizing taxes on inheritances by establishing tax rates between 4% and 10%. The government finally did not accept this recommendation. Also, there are political parties committed to this harmonization as a way to balance the situation of citizens.
In this sense, we cannot forget that after the municipal and regional elections which took place last May 24, the tax system may change a lot. It should not be surprising that some of the benevolent Communities, which are likely to change its governments now, may raise taxes, so we must be attentive to possible legislative reforms to act earlier, if necessary.