Spain Regional Tax Rankings Show Reformers Closing the Gap With Madrid

Spain’s 2026 Regional Tax Competitiveness Index (RTCI) shows how quickly regional standings can shift when tax policy changes. Extremadura climbed from last place in 2017 to eighth, and Andalusia rose from 16th to seventh. Madrid still leads, while Catalonia remains at the bottom. The pattern points to a widening separation between regions that have changed several parts of their tax systems and those that have made fewer changes.

Now in its 10th edition, the Regional Tax Competitiveness Index compares Spain’s autonomous communities. Its decade-long view makes the movement in the standings more telling than any single year’s result: a region can lose ground even without a new tax increase if its peers reform and improve their relative positions.

Reforms drove the biggest upward moves

Extremadura recorded the largest rise between 2017 and 2026, gaining 11 places and 1.43 points. Its policy changes accumulated over several years. The region introduced a 99 percent rebate on inheritance taxAn inheritance tax is levied upon the value of inherited assets received by a beneficiary after a decedent’s death. Not to be confused with estate taxes, which are paid by the decedent’s estate based on the size of the total estate before assets are distributed, inheritance taxes are paid by the recipient or heir based on the value of the bequest received. for close relatives, then approved a full wealth taxA wealth tax is imposed on an individual’s net wealth, or the market value of their total owned assets minus liabilities. A wealth tax can be narrowly or widely defined, and depending on the definition of wealth, the base for a wealth tax can vary. exemption in 2023. It also cut personal income tax rates, with particular reductions for lower-income earners. Changes in 2026 extended inheritance tax relief to nephews and nieces in specified circumstances. Together, the measures helped move Extremadura into the index’s top 10.

Andalusia gained nine places, moving from 16th in 2017 to seventh in 2026, with its score rising by 1.13 points. The region reduced personal income tax rates and adjusted tax bracketsA tax bracket is the range of incomes taxed at given rates, which typically differ depending on filing status. In a progressive individual or corporate income tax system, rates rise as income increases. There are seven federal individual income tax brackets; the federal corporate income tax system is flat. and allowances to account for inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending.. It also introduced a 99 percent inheritance tax rebate and a €1 million exemption for close relatives, changed wealth tax treatment through a rebate tied to the national solidarity tax, and permanently lowered property transfer taxes and stamp duties. That broad set of changes, spanning income, inheritance, wealth, and property taxation, underpins the region’s rise.

Murcia advanced five places to ninth. Its gains followed lower inheritance tax burdens, reduced personal income tax rates, and changes that eased wealth taxation. The Valencian Community, by contrast, is recovering from a period of lost ground after tax increases in 2021 and 2022. It regained two positions in 2026 following lower income tax rates, a higher wealth tax exemptionA tax exemption excludes certain income, revenue, or even taxpayers from tax altogether. For example, nonprofits that fulfill certain requirements are granted tax-exempt status by the Internal Revenue Service (IRS), preventing them from having to pay income tax. threshold, lower transfer taxes and stamp duties, and wider inheritance tax relief.

Relative decline weighs on several regions

Castilla-La Mancha had the sharpest fall, slipping from eighth place in 2017 to 16th in 2026. The index’s decade-long comparison highlights the competitive effect of neighboring regions changing their systems: a jurisdiction can fall in the rankings when others reduce tax burdens or revise their rules, even if its own policies have not changed substantially.

Asturias dropped from 13th to 18th. Reforms in 2025 and 2026 came after a long period of limited policy change and did not lift the region out of the bottom tier. Inheritance taxation remains a particular weakness in the index. Navarre fell five places to 12th. Recent changes improved personal income tax treatment for lower-income taxpayers, but the region’s wealth tax score remains the lowest in that index component, reflecting earlier policy choices on wealth and inheritance taxes.

Catalonia ranked 19th in 2026, with a score of 4.45, making it the lowest-ranked jurisdiction. The index points to high marginal personal income tax rates, a comparatively heavy wealth tax burden, and high property transfer tax rates. Catalonia also levies 11 regional own taxes, around twice the number imposed by most autonomous communities. Reforms over the period have not offset the effect of earlier tax increases enough to improve its position materially.

Madrid’s lead remains substantial

Madrid retained first place, with a score of 7.12. Its approach combines low taxation with administrative simplicity: the region has eliminated its regional own taxes, applies a full wealth tax rebate linked to the national solidarity tax, and maintains a competitive inheritance tax system. Madrid has also cut personal income tax rates repeatedly and adjusted brackets for inflation.

The distance between Madrid and the next-ranked jurisdictions is measurable but not enormous: its score is 0.35 points above Biscay, 0.38 above Álava, and 0.52 above Guipúzcoa. The gap with Catalonia is much wider, at 2.67 points. That spread captures the index’s central divide between the leading tax systems and the lowest-ranked one.

A tight cluster below the leaders

Below Madrid and the Basque provinces, the 2026 scores bunch together. The Canary Islands placed fifth at 6.38, followed by La Rioja at 6.36, Andalusia at 6.31, Extremadura at 6.26, Murcia at 6.19, and Cantabria at 6.18. Just 0.20 points separate fifth from 10th place. In this group, relatively small policy changes could alter the ordering from one edition to the next.

The gap from Cantabria in 10th to the Balearic Islands in 11th is 0.21 points. From the Balearic Islands through Castilla-La Mancha in 16th, the total score spread is 0.36 points, indicating another close cluster. Below Castilla-La Mancha, the distance to the weakest performers widens by around 0.60 points.

The resulting ranking has several tiers: Madrid and the three Basque provinces at the top; a closely packed group from the Canary Islands to Cantabria; a middle-to-lower group running from the Balearic Islands through Castilla-La Mancha; and a weaker set that includes Aragon, Asturias, and Catalonia. The index’s scores describe relative tax competitiveness, so these groupings show where regional systems stand against one another rather than measuring the broader economic performance of each territory.

Policy changes will shape the next ranking

The decade’s clearest upward moves came from regions that changed several major tax categories. Extremadura and Andalusia are the strongest examples, while Murcia also advanced. The declines in Castilla-La Mancha, Asturias, Navarre, and Catalonia show that rankings can erode when policy changes lag behind those of other regions or when particular tax components weigh heavily on a jurisdiction’s score.

For regional policymakers and businesses tracking Spain’s fiscal differences, the next edition will turn on whether recent reforms continue, widen, or are matched elsewhere. With only 0.20 points separating fifth and 10th place, modest changes could reorder much of the upper-middle tier; Madrid’s lead and Catalonia’s distance from it set a broader contrast that will take more substantial shifts to alter.