The property tax rates in Spain are regularly adjusted in response to market changes. Property tax is a primary source of revenue for local governments in various provinces and cities in Spain. In 2018, Spain adjusted the property tax rates in 21 provinces. In 2019, property tax payments in Spain may still undergo changes.
Madrid is the city in Spain where the government collects the highest property tax. The average tax payment is also the highest compared to other regions. Many industry professionals use Madrid's tax rate as a benchmark when conducting data analysis. However, this year, there has been no adjustment to Madrid's property tax, which remains at a rate of 0.51%. Even so, this year, Madrid's fiscal revenue is expected to reach approximately 1.397 billion euros.
In 2018, three provinces in Spain raised their property tax rates. The largest adjustment was in Lleida province, which increased its rate from 0.914% to 0.943%, making it the second highest property tax rate in Spain, second only to Tarragona province. According to data compiled by the Economic and Tax Advisory Organization (REAF), after the adjustment, the average property tax paid by local residents in Lleida province is 369.5 euros. Girona province raised its rate from 0.886% to 0.907%, becoming the third highest property tax rate in Spain, with local residents paying an average of 327.5 euros in property tax. Soria province increased its rate from 0.52% to 0.55%, resulting in an average property tax payment of 332.3 euros by local residents.
Aside from these three provinces, the remaining 18 provinces have lowered their tax rates. The province with the largest reduction is Castellón, which decreased its rate from 0.7475% to 0.69%. The second largest reduction was in Orense province, where the property tax rate was lowered from 0.54% to 0.49%. Other provinces also made relative reductions in their property tax rates.
Although the adjustments to property tax rates this year may not seem significant from the data, property tax revenue is a major source of fiscal income for various provinces and cities in Spain, accounting for approximately 28.2% of total revenue. Since the financial crisis, property tax revenue has been the only source of local fiscal income that has not been affected. Therefore, even minor adjustments to property tax are significant measures that the Spanish government must approach with caution. The adjustment of property tax rates is also a major factor that Chinese investors in Spain need to consider regarding their property investments.
It is worth mentioning that in Spain, under certain specific circumstances, taxpayers can apply for exemptions or reductions in certain taxes. Moreover, the amount of the reduction can be quite substantial. For example, this year, Madrid has implemented relative tax reduction policies for cultural venues (with a maximum reduction of 15,000 euros).