Why does Ley 5/2025 matter to expats?
Spain continues to attract expats with its Mediterranean lifestyle, and the Comunidad Valenciana is a top destination. However, failing to understand regional tax reforms could lead to unexpected liabilities. Ley 5/2025 reshapes the way Valencia handles key taxes—so planning ahead is more important than ever.
The beautiful Comunidad Valenciana continues to be a magnet for expats, offering an exceptional quality of life under the Mediterranean sun. However, as of June 1, 2025, the new Ley 5/2025, of May 30, introduces significant tax changes that both residents and non-residents need to understand.
This legislation aims to adjust the region’s tax framework, and while some updates are positive, others will require careful planning. Let’s delve into the key changes that could impact your financial situation.
Key Tax Amendments Introduced by Ley 5/2025
The new law affects key taxes such as Wealth Tax, Inheritance and Gift Tax, and Property Transfer Tax. Here’s what’s changing:
| Tax Type | What’s Changing | Effective From |
|---|---|---|
| Wealth Tax (IP) | Exempt minimum raised to €1,000,000 for tax residents | Dec 31, 2025 |
| Inheritance & Gift Tax (ISD) | 25–50% reduction for siblings, aunts/uncles, nieces/nephews | Jun 1, 2026 / Jun 1, 2027 |
| Property Transfer Tax (ITPO) | General rate reduced from 10% to 9% | Jun 1, 2026 |
| Stamp Duty (AJD) | General rate reduced from 1.5% to 1.4% | Jun 1, 2026 |
1. Wealth Tax (Impuesto sobre el Patrimonio – IP) in Valencia
This is one of the most significant changes for residents with substantial assets in Valencia.
- Increased Exempt Minimum: For tax residents in the Valencian Community, the minimum exempt amount for Wealth Tax will double from €500,000 to €1,000,000.
- When does this apply? This change is effective for tax accruals from December 31, 2025, meaning it will apply to the 2025 fiscal year’s declarations (filed in 2026).
- What does this mean for expats? If you are a tax resident in Valencia and your worldwide assets fall below €1,000,000 (after exemptions), you may no longer be liable for Wealth Tax in the region.
- Non-residents generally pay Wealth Tax only on assets located in Spain, with the state-level exemption of €700,000. This regional change primarily benefits tax residents in Valencia.
2. Inheritance and Gift Tax (Impuesto de Sucesiones y Donaciones – ISD)
This tax sees significant adjustments, particularly for certain family relationships.
- New Bonification for Group III Relatives: The law introduces a new regional bonification (reduction) for inheritances and gifts between siblings, aunts/uncles, and nieces/nephews.
- Phased Implementation:
- From June 1, 2026: A 25% bonification will apply.
- From June 1, 2027: The bonification increases to 50%.
- Existing Bonifications Maintained: The current 99% bonification for direct relatives (spouses, children, parents) remains in place for residents, a major attraction for expats in Valencia.
- Phased Implementation:
3. Property Transfer Tax (ITPO) and Stamp Duty (AJD)
These taxes are relevant when buying property in the Valencian Community.
- Reduction in General ITPO Rate: The general rate for acquiring real estate is reduced from 10% to 9%.
- When does this apply? Effective for tax accruals from June 1, 2026.
- Important Exception: The 11% rate is maintained for property transfers exceeding €1,000,000.
- Reduction in General AJD Rate: The general rate for Stamp Duty decreases from 1.5% to 4%, effective June 1, 2026.
Frequently Asked Questions (FAQ) about Ley 5/2025
Here are answers to some of the most common questions expats have about these new tax rules.
Does the new €1,000,000 Wealth Tax exemption apply to me if I’m a non-resident?
No. The new €1,000,000 exemption is a regional benefit specifically for tax residents in the Comunidad Valenciana. Non-residents with assets in Spain are generally subject to the state-level exemption of €700,000.
I am buying a house in Valencia in 2025. Will I pay the lower 9% property tax (ITPO)?
No. The reduction of the ITPO rate from 10% to 9% is only effective for purchases made from June 1, 2026, onwards. Any purchase completed before that date will be subject to the current 10% rate.
Has the 99% inheritance tax reduction for spouses and children been removed?
Absolutely not. The popular 99% bonification for direct relatives (spouses, children, parents) remains fully in place for residents. The new law adds a new benefit for siblings, nieces, and nephews without affecting the existing one.
My main home is worth €400,000. Is this counted towards the €1,000,000 Wealth Tax limit?
It depends. For tax residents, the main home is usually exempt up to €300,000. In your case, only €100,000 (€400,000 – €300,000) would count towards the €1,000,000 limit. This means you could have up to €900,000 in other assets before being liable for Wealth Tax.
Do I need to take any immediate action regarding these changes?
While some changes are not immediate, now is the perfect time for strategic planning. Reviewing your will, assessing your asset structure, or planning property purchases in light of these future dates can lead to significant tax savings.
Will these changes affect how I should draft my will in Spain?
Possibly. If you’re a resident in Valencia and plan to leave assets to extended family (siblings, nephews, nieces), it’s worth reviewing your testament with a legal expert to apply the new tax reductions.
Should I wait until 2026 to buy property in Valencia?
That depends. While the ITPO reduction starts in June 2026, other factors like market conditions and personal timing may outweigh this benefit. A personalized analysis is recommended.
What About Non-Resident Expats?
It is crucial to remember that Ley 5/2025 primarily legislates on taxes for tax residents of the Comunidad Valenciana. Non-residents are generally governed by state-level legislation (Non-Resident Income Tax – IRNR), which is typically less generous than the regional bonifications.
Next Steps for Expats in Valencia: Your Trusted Tax Advisors at Lextax
- Assess Your Tax Residency Status: Confirming if you are a tax resident or non-resident is the first critical step.
- Review Your Financial Situation: Understand your worldwide assets and income streams to see how these changes affect you.
- Consult a Professional: Given the complexity and phased implementation, engaging with a Spanish tax advisor is essential. At Lextax, our team of expert lawyers and tax advisors specializes in Spanish and international tax law. We provide tailored solutions to help expats navigate these changes and ensure full compliance.
Visit www.lextax.es to schedule your consultation.
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