Valencian authorities approve a tax reform aimed at advancing fiscal progress amid inflation and the energy crisis. The reform includes reductions on several taxes, with income tax adjustments for different income bands and large assets. The changes take effect retroactively from January 1, 2022, and from 2023 onward, to place more pressure on higher incomes and significant holdings.
Negotiations spanning about a month brought together three EU partners to balance the numbers and sign a definitive agreement. The tax cuts are projected to lower the income forecast for the year by 149 million euros, with the potential to rise to 180 million. For the next fiscal year, revenue growth is estimated at 40 million euros, driven by higher revenues from electricity and transmission taxes. The increase in the income brackets beyond 60,000 euros is also part of the plan, though the exact collection figures for this item are not yet published. (Citation: Valencian government briefing)
The agreement was sealed at a special plenary session of the Consell, with the president Ximo Puig and vice presidents Aitana Mas and Héctor Illueca present. Negotiation teams finalized the deal on Sunday afternoon. The reform will unfold through two procedures: tax deductions will be formalized by a decree-law effective at the start of the year, approved in the morning session to ease burdens on taxpayers reporting next spring, while tax increases will be enacted through the 2023 budget project currently nearing final approval. (Citation: Consell communique)
Puig announces gains for partners: higher incomes and increased tax pressure on large estates
Mas, the Consell’s vice president and spokesperson, together with Arcadi España, the Finance minister, presented the news, stressing that 97% of Valencians will see a lighter tax bill. In total, about 1.3 million middle- and low-income taxpayers will benefit, with a projected global saving of at least 149 million euros for families. Rents below 30,000 euros account for most savings, totaling around 101 million euros, with the average saving per taxpayer estimated at 11 euros. (Citation: Consell briefing)
The reform centers on three key axes. First, a 10% rise in the minimum exemption amounts for taxation. The overall exemption increases from 5,550 euros to 6,105 euros; for seniors over 65, from 6,700 euros to 7,370 euros; and for those over 75, from 6,950 euros to 7,645 euros. For taxpayers with disabilities, exemption brackets range from 3,000 to 9,000 euros. The exemption for grandchildren also climbs by 10% (2,400 to 2,640 euros for the first child; 4,000 to 4,400 euros for the third child). Increases also apply to the minimum amounts for seniors over 65 and over 75, shifting some thresholds to higher values. (Citation: Fiscal reform summary)
Tax relief: how the Generalitat’s cut affects Alicante and potential savings
Second, a new regional distribution of personal income tax implies notable savings: a resident earning 19,000 euros could save about 97.95 euros on rent; a 48,000-euro earner would see roughly 57 euros saved, while someone earning over 65,000 euros would face a marginal change of 0.1 euros more in some scenarios. The minimum exemption has been raised to eliminate more taxes, and Generalitat’s reductions extend to restore exemptions for more Valencians, with more people reaching zero quotas as the thresholds rise. (Citation: Tax relief explainer)
Third, the reform expands 10% cuts in multiple areas. For example, the maternity fee moves from 270 to 300 euros, the limit for the habitual residence rent rises to 800 euros, and the income threshold for deductions related to current housing costs increases from 25,000 to 30,000 euros; the 40,000 to 47,000 bracket also expands. Two new measures add a 100-euro deduction for mortgage interest, allowing 50% relief of the difference between 2022 and the prior year’s interest, capped at 100 euros. There are also targeted cuts for fertility treatments not covered by public health, amounting to 100 euros. (Citation: Reform details)
Tax increases ahead: 2023 adjustments to high-income and large-asset taxes
Looking forward to 2023, three special taxes—personal income tax, Wealth tax, and Transmission tax—will see adjustments. In wealth tax, an extra 0.25% is added to the last installments for estates over 1.3 million euros, projecting around 40 million euros in additional revenue. The Open Patrimonial Transmissions tax will rise to 11% for residential deals above one million euros, with an estimated 15 million euros in revenue. The government has noted a potential revenue shortfall of up to 180 million euros, and further details on the additional collection from personal income tax remain unclear. Officials emphasize that revenues should be viewed in a global context, and that autonomy continues to empower the Valencian Government to implement these measures. (Cited: regional press briefing)
Mas highlighted that all three government groups are satisfied with the agreement. The Consell’s General Assembly also approved the Tax Measures Act, Administrative and Financial Management and Organization of the Generalitat, introducing Valencia Participation Income beneficiaries who will receive refunds. The Youth Card is planned to be fully free, a measure projected to cost about one million euros. (Citation: Assembly record)