Tax reforms in the Valencian Community 2026

On May 31, 2025, the publication of Law 5/2025 on fiscal measures in the Valencian Community in the Diari Oficial de la Generalitat Valenciana marked a turning point. This legislation introduces a series of tax reforms that will directly affect Personal Income Tax (IRPF), the Transfer Tax (ITP), and Inheritance and Gift Tax (ISD).

Updated Tax Landscape in the Valencian Community (Law 5/2025)

Law 5/2025 brings significant changes that redefine the fiscal environment in the Valencian Community, with effects extending into 2026 and beyond.

Below is a comparative table of key tax rates, summarizing the current situation and potential scenario for 2026, highlighting the most relevant areas for luxury property owners.

Wealth Tax (IP)

Starting December 31, 2025, a regional exempt minimum of €1,000,000 will apply to all Valencian residents subject to the Wealth Tax. This means the first €1,000,000 of assets will be tax-exempt. Previously, the minimum was €500,000, with €1,000,000 only for those with disabilities — a difference now unified.

Despite this 99% regional deduction on Wealth Tax, the national Solidarity Tax on Large Fortunes (IGF) remains a critical factor. It applies to net worth over €3 million at progressive rates (1.7%, 2.1%, 3.5%). Any regional Wealth Tax paid is deductible from the IGF. The major uncertainty for 2026 is whether the national government will extend or make the IGF permanent beyond its original temporary nature (2023 and 2024). If extended, it would effectively override the regional 99% relief, meaning high-net-worth individuals would continue to face significant tax burdens regardless of the Valencian Community's regional policies.

Inheritance and Gift Tax (ISD)

Law 5/2025 confirms a 99% tax reduction for inheritances and gifts to spouses, ascendants, descendants, and individuals with recognized disabilities — amounting to near-total exemption for close relatives.

New reductions of up to €156,000 are introduced for gifts between family members, depending on age and kinship. These transactions must be formalized in public documents.

For gifts to beneficiaries in Groups III (siblings, uncles/aunts, nephews/nieces) and IV (cousins and others), the 50% tax reduction will be applied progressively: 25% from June 1, 2026, and 50% from June 1, 2027.

Transfer Tax (ITP) and Stamp Duty (AJD)

Law 5/2025 introduces key changes in ITP and AJD:

• New reduced 4% rate for purchases of agricultural land, effective June 1, 2025.
• General property purchase rate increase from June 1, 2026:
  • 9% for properties up to €1 million
  • 11% for amounts over €1 million
• General AJD rate reduced to 1.4% from June 1, 2026
• 50% AJD reduction for property transactions related to regionally recognized strategic projects (from June 1, 2025)

Personal Income Tax (IRPF)

The law updates regional IRPF benefits with new deductions aimed at families and vulnerable individuals, effective June 1, 2025 (unless stated otherwise):

• Birth, adoption, and fostering: €600 (1st child), €750 (2nd), €900 (3rd+) — also valid for two subsequent years.
• Disability: From €246, increasing with multiple cases in the household.
• Early education and work-life balance: 15% of daycare expenses up to €297, and €460 per child aged 3–5 (for the mother or guardian only).
• School supplies: Up to €110 per minor in public/semi-public schools, subject to income/unemployment criteria.
• Eco, cultural, and linguistic donations: 20% deduction on the first €250, and 25% on the remainder.
• Optical expenses: 30% deduction up to €100 per taxpayer for corrective lenses and non-preassembled glasses (from Jan 1, 2025).
• Depopulation relief: Expanded deductions for residents in areas at risk of depopulation (from Jan 1, 2025).

Tax Impact and Strategies for Luxury Property Investors in the Valencian Community

As of June 2026, increased Transfer Tax (ITP) rates for luxury properties will significantly raise acquisition costs, potentially encouraging earlier purchases. Meanwhile, the continued generosity of the Inheritance and Gift Tax (ISD), particularly for spouses and descendants, reinforces the region’s appeal for long-term wealth planning and multi-generational asset transfers.

This ITP change could slightly cool demand in the luxury segment post-2026, although the region’s overall attractiveness and ISD advantages may counterbalance that effect. The biggest uncertainty lies in whether the Solidarity Tax on Large Fortunes (IGF) becomes permanent — posing a substantial ongoing tax burden for those with net worth exceeding €3 million, and possibly affecting decisions on residence and asset allocation.

Valencian tax residents are fully impacted by these reforms, while non-residents with assets in Spain above €3 million must also consider the implications of the IGF. This concern applies equally to current property owners and prospective international investors in the region’s luxury real estate sector.

In this context, proactive tax planning is advised, including anticipating the possible extension of the IGF, reviewing ownership structures and ensuring liquidity for tax obligations. Leveraging the current ISD benefits before any regulatory changes is key. Specialized legal and tax advisors are essential for structuring assets effectively, ensuring compliance, and optimizing fiscal outcomes in a dynamic and complex legal environment.

Have questions? Consult the Luxinmo legal team to clarify your tax situation in Alicante province from 2026 onwards.