The State hands over part of its taxes to the Regions

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1. The law sets up the general system under which the State cedes to the Autonomous Communities the revenue from several taxes: part of personal income taxincome tax The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings. (IRPF), the Wealth Tax, the Inheritance and Gift Tax, the Tax on Property Transfers and Documented Legal Acts, and taxes on gambling. If one of these taxes is removed or changed, the cession ends or changes too.
2. The new system starts on January 1, 1997 and applies to the Autonomous Communities that take it on. Those that do not keep operating under the previous 1983 law.
3. The ceded revenue from personal income tax is the regional share of the tax payments of residents in each territory, plus the part of the debt collected through audit reports or late filings, with some deductions.
4. To assign revenue to each territory, connecting factors are used: in general, a person's habitual residence. For inheritance and gifts, it depends on where the deceased or the donee lives; for property transfers, there are rules based on the type of asset or act.
5. The Autonomous Communities may take on regulatory powers over the ceded taxes: for example, approving their own income tax rate scale (with limits, such as staying within 20% of the state one) and their own deductions, or setting the exempt minimum and the rate scale of the Wealth Tax. If they do not, state rules apply.
6. The State delegates to the Autonomous Communities the management, assessment, collection and audit of the ceded taxes, except for personal income tax, whose management always stays with the State.
7. The law creates the Mixed Commission for Tax Management Coordination and the Territorial Councils for Tax Management Direction, bodies where the Autonomous Communities take part in running the State Tax Administration.
8. The laws on personal income tax, wealth, inheritance and gifts, and property transfers are amended to fit the cession, creating for example a regional income tax scale alongside the state one.

Who it affects

• Taxpayers living in common-regime Autonomous Communities, because part of their taxes (including income tax) is managed and, where applicable, regulated by their region.: They may face different rates or deductions depending on where they live.
• People who inherit, receive gifts, or buy and sell assets, because the taxes on these transactions are ceded and regions can set their own rates and reductions.: The tax bill can vary by territory.
• People who move their residence between regions, because rules are set to determine their new tax residence and moves made to pay less are controlled.: They must follow the rules of their new residence, and some moves have no effect.
• The common-regime Autonomous Communities, which take on regulatory and management powers over the ceded taxes.: They manage, collect and audit several taxes and can pass their own tax rules.

Words worth knowing

Cesión de tributos (tax cession)

The State lets the Autonomous Communities keep the money raised by certain taxes in their territory, under conditions set by law.

Punto de conexión (connecting factor)

The criterion that decides which region gets the tax money, for example where the person lives or where the property is located.

Tarifa (rate scale)

The table of rates (percentages) applied to the tax base to work out how much tax is due.

Mínimo exento (exempt minimum)

An initial amount of wealth or base that is not taxed at all.

Delegación de competencias (delegation of powers)

The State assigns specific tasks, such as managing, collecting or auditing a tax, to the Autonomous Communities, even though those tasks are originally its own.

income tax

The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings.

It summarizes the law as published in the BOE. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries