Did you know wealth is diversely distributed in Spain? According to the Spanish National Agency for Tax Administration, half of the population with an annual income over €600,000 live in the Autonomous Community of Madrid. Nearly 47% of the over 11,000 people with personal income tax exceeding €601,000 annually live in the Spanish capital, around 5,100 taxpayers. Far below are Catalonia with 2,300 people (21%), and the Autonomous Community of Valencia and Andalusia, each with approximately 800 high-income taxpayers.
This imbalance between territories is due to different reasons. Primarily because Madrid is Spain’s capital and because of its ‘headquarters effect’. It attracts many employees with substantial salaries since the majority of large listed companies settled in the city, causing upper management to live in and pay to the region.
Furthermore, the 100% bonus on wealth tax practised since 2011 is another of the basic elements that tips the scale in the country’s capital favour. This tax break on wealth has largely contributed to the gradual exodus of large fortunes from within Spain to Madrid.
Spain’s ‘rich’ taxation in numbers
Numbers speak for themselves: the large proportion of high-income allows Madrid to collect around €830M annually through personal income tax. In other words, 38% of the €2,170M Spain obtains by way of this same tax. In addition, high-incomes find interesting paying taxes in Madrid. According to the latest data released by the Registry of Fiscal Advisory Economists (Registro de Economistas Asesores Fiscales, REAF) under the Spanish Official Council for Financial Advisers (Consejo General de Economistas), the Autonomous Community has the lowest maximum aggregate rate for Spain: 45% for the highest incomes.
A rate quite far off from the maximum aggregate rate of the Autonomous Community of Valencia at 54%, of Navarre at 52%, and the current 51,5% in Rioja. Other regions such as Catalonia, Cantabria, the Canary Islands, or Asturias apply the rate at 50%. By extension, the average liquidation for high taxpayers in Madrid is one of the lowest in Spain at €160,400 a year against €195,400 recorded in the country as a whole. This number reaches €197,000 in Catalonia, €211,000 in the Autonomous Community of Valencia, and €246,200 in Andalusia.