Spain’s 2026 Regional Tax Rankings Show Uneven Reform Across Regions

Spain’s regional tax rankings reveal where reform is—and isn’t—happening

The 2026 Spanish Regional Tax Competitiveness Index (RTCI) points to a split among the country’s regions: some are adjusting taxes to protect taxpayers or attract residents and businesses, while others remain near the bottom with few recent reforms. That gap matters. A region’s tax rules can shape where people invest, work, and pass on assets.

The report is published in collaboration with Fundación para el Avance de la Libertad; the full report is available in Spanish. The RTCI compares Spain’s 19 regions using more than 60 measures across five areas: individual income taxes, wealth taxes, inheritance taxes, transfer taxes and stamp duties, and other regional taxes. Its scores offer policymakers, businesses, and taxpayers a way to compare tax systems and see where each region could improve.

Three policy debates drive this year’s changes

The most consequential questions concern wealth taxation, inheritance, and inflation. Spain’s central government made the solidarity wealth tax permanent for net assets above €3 million, adding it on top of regional wealth taxes. Andalusia, Cantabria, La Rioja, Madrid, and Murcia responded with deductions covering the difference between regional and solidarity tax liabilities. That lets them preserve relief for residents with net wealth below €3 million while the central government collects the amount it had planned to raise from wealthier residents.

Extremadura took a different course and did not create that deduction, leaving the central government to collect revenue from residents whose net wealth exceeds €3 million. The Balearic Islands and the Valencia Community raised their exemption thresholds to €3 million and €2 million, respectively. The legal footing remains unsettled: a Constitutional Court ruling is pending on whether raising the top marginal rate from 2.5 percent to 3.5 percent violates the constitutional ban on confiscatory taxation, and whether the 2021 Budget Law went beyond its authority by making the tax indefinite.

Inheritance tax remains another pressure point. Following earlier RTCI recommendations, more regions introduced 99 percent relief for close heirs, bringing the total to 11; some also extended relief to more distant relatives. The report says Spain has the world’s highest inheritance tax rate, with a top rate of 87.6 percent for unrelated or distant heirs. At those levels, tax bills can be large enough to prompt heirs to disclaim inheritances and sell assets. The relief for close family members is a response to that burden, though it leaves the position of other beneficiaries less favorable.

Inflation has also pushed tax design onto the agenda. La Rioja became Spain’s first region to automatically adjust all personal income tax brackets and personal and family allowances when inflation reaches or exceeds 3 percent. Other regions have made occasional inflation-related adjustments, but La Rioja’s rule is broader and automatic. That distinction matters because inflation can raise tax bills even when people’s purchasing power has not improved.

Madrid leads, with the Basque provinces and Canary Islands also in the top five

The five highest-ranked regions are the Community of Madrid, Biscay, Álava, Guipuzcoa, and the Canary Islands. Their common feature is strong performance across all five RTCI components. Madrid holds first place and improved its score by 0.10, widening its lead over the other autonomous communities.

Madrid still has room to improve, according to the report. It could lower the top inheritance tax rate from 34 percent to 25 percent and remove the adjustment based on an heir’s pre-inheritance wealth and family relationship to the deceased. The report also recommends indexing income tax to inflation to limit bracket creep, and cutting the first-bracket rate by 0.5 percentage points to match Extremadura and La Rioja.

The three Basque provinces show how a strong overall position can conceal differences within a region. Their wealth-tax scores vary: Biscay ranks ninth on that component, Álava 11th, and Guipuzcoa 17th. All three introduced their own solidarity tax in response to the central government’s measure, alongside the wealth tax they already applied.

In December 2025, the provinces indexed personal allowances and income tax brackets to inflation. Gipuzkoa and Biscay also adjusted family allowances; Álava had already raised them for the 2025 tax year. The report says all three could better protect minimum-wage workers by increasing the earned-income tax credit so those workers would owe no income tax in 2026. It also points to inheritance tax reform: the provinces are tied for 12th on that component. Guipuzcoa could additionally raise its wealth-tax threshold to Biscay’s level and reduce its rate.

The Canary Islands rose to fifth place, regaining the spot it had given up to La Rioja the year before. The report attributes much of the gain to indexing income tax to inflation. Further proposals include a wealth-tax credit equal to the gap between regional and solidarity tax liabilities, a three-percentage-point cut in personal income tax rates, and a combined top marginal rate of 47.5 percent, matching Germany. The report also recommends automatic inflation indexing for income tax.

The bottom five have broad weaknesses in core taxes

The lowest-ranked regions are Galicia, Castilla-La Mancha, Aragon, Asturias, and Catalonia. Their scores are weak across much of the index, especially in its three largest areas: income, wealth, and inheritance taxes. This is a broad pattern, not a problem confined to one tax or one region.

Catalonia remains last. It made no significant tax reforms in 2026 and levies twice as many regional taxes as any other autonomous community. The report also judges its individual income, inheritance, and wealth taxes among Spain’s worst structured.

Asturias stays 18th, with its 2026 income tax changes making little difference to its index position. The reform lowered the lowest rate, raised personal and family allowances, and expanded the childcare tax credit, while increasing taxes on higher earners. The report argues that broader income and inheritance tax reform is needed; Asturias has by far the highest inheritance tax liability among the regions.

Aragon made no reforms this year and remains 17th. The report identifies weaknesses in its income, wealth, and inheritance taxes, and calls for repeal of its two new regional taxes on wind and solar farms.

Castilla-La Mancha fell one place to 16th. The report links the decline to the absence of major reforms and the Valencia Community’s improved performance. Galicia dropped two places to 15th as the Valencia Community and Navarre moved ahead. Its suggested steps are to repeal the tourist tax and raise wealth-tax relief from 50 percent to a full exemption.

2026 regional rankings and year-over-year changes

Reforms moved several regions, but the rankings still show uneven progress

Valencia Community gained two places to 14th in the 2026 index, passing Galicia and Castilla-La Mancha. The changes behind that rise span several tax categories: personal income tax rates fell across all brackets in July 2026, with additional cuts scheduled for 2027; reductions to property transfer tax and stamp duty took effect that July under reforms approved in 2025; and the wealth tax exemption threshold rose from €1 million to €2 million for a second consecutive year. Valencia also introduced a 25 percent inheritance tax relief for some extended family members, set to increase to 50 percent in June 2027.

That progress has limits. Valencia’s combined central and regional top marginal income tax rate remains 53.85 percent, the fourth highest in Europe, behind Denmark at 60.5 percent, France at 55.4 percent, and Austria at 55 percent. The ranking improvement is real, but it doesn’t mean Valencia’s income and wealth taxes have become light.

Smaller shifts, different causes

Navarre rose two places to 12th, helped by changes to personal income tax. In 2026, the income threshold for its €1,400 employment deduction increased from €10,500 to €12,500. Taxpayers earning up to €17,500 also received a €1,280 increase in their personal allowance. Further gains would require broader changes: lowering taxes on income above €35,000, increasing personal and family allowances, cutting rates across brackets, and bringing the top marginal rate down to 47.5 percent, matching Germany’s. Indexing brackets, allowances, and employment deductions to inflation each year could also curb fiscal drag.

The Balearic Islands advanced one place to 11th because Castile and Leon fell in the rankings. The islands’ own tax structure still leaves room for reform, particularly on personal income tax, property transfer tax, and stamp duty.

Castile and Leon slipped two places to 13th after a methodological change in the Regional Tax Competitiveness Index (RTCI). Its environmental impact tax is now counted as four taxes rather than one, a change intended to make comparisons with other autonomous communities more consistent. La Rioja, meanwhile, fell one place to sixth as the Canary Islands moved ahead after income tax reforms.

The broader message is that a region’s annual rank can shift because of policy changes, changes in how taxes are counted, or another region’s reforms. Valencia and Navarre made measurable gains, but their positions alone don’t tell you how much the tax burden changed—or whether the underlying system is now competitive.

See the full report