Over the past ten years, Spain's regions have sharply diverged on tax policy, with some territories climbing from last place to the top tier while others fell behind as neighbors cut rates and simplified codes. The Regional Tax Competitiveness Index, published by the Tax Foundation in its 10th edition, tracks how Spain's 19 autonomous communities rank on tax attractiveness for businesses and residents. The most dramatic shift came from Extremadura, which jumped 11 positions between 2017 and 2026 — moving from 19th to 8th place — while Castilla-La Mancha dropped eight spots, from 8th to 16th, illustrating how inaction can be as damaging as raising taxes.
The report shows that Extremadura increased its overall score by 1.43 points through a sustained campaign of reform. The region introduced a 99 percent rebate on inheritance taxes for close relatives, approved a full wealth tax exemption in 2023, and lowered income tax rates, particularly for those with lower earnings. Andalusia followed closely, rising from 16th in 2017 to 7th in 2026 with a score increase of 1.13 points. It cut personal income tax rates repeatedly, indexed tax brackets to inflation, introduced a 99 percent inheritance tax rebate alongside a €1 million exemption for close relatives, and permanently reduced property transfer taxes and stamp duties. Murcia climbed five positions to 9th place by easing inheritance taxes, lowering income tax rates, and reducing wealth taxation. The Valencian Community regained two positions in 2026 after losing ground in 2021 and 2022, reversing course with lower income tax rates, a higher wealth tax exemption threshold, and broader inheritance tax relief.
On the other end, Castilla-La Mancha recorded the steepest decline, dropping from 8th to 16th as neighboring regions modernized while it stood still. Asturias fell from 13th to 18th, with reforms in 2025 and 2026 arriving too late to offset years of limited action. Navarre slid five places to 12th, weighed down by decisions on inheritance and wealth taxation — it ranks last among all regions in the wealth tax component. Catalonia remains anchored at the bottom in 19th place with a score of 4.45, maintaining high marginal income tax rates, one of the country's heaviest wealth tax burdens, high property transfer rates, and 11 regional taxes, roughly double the number levied by most other communities. Madrid retained the top position with a score of 7.12, leading second-place Biscay by 0.35 points and outperforming Catalonia by 2.67 points.
According to the Tax Foundation, higher-ranked regions offer tax systems that are more neutral, predictable, and investment-friendly, positioning them better to attract economic activity, retain talent, and support long-term growth. The report explains that the 2026 results reveal an increasingly segmented landscape: Madrid and the three Basque provinces hold a clear advantage at the top, followed by a densely packed upper-middle tier from the Canary Islands in 5th to Cantabria in 10th, separated by just 0.20 points. A lower-middle tier runs from the Balearic Islands through Castilla-La Mancha in 16th, with a total spread of 0.36 points, while a bottom group including Aragon, Asturias, and Catalonia remains significantly behind the national average. The close clustering means even modest tax changes could produce large swings in the rankings from year to year.
The report concludes that the period from 2017 to 2026 demonstrates that tax policy matters, with regions that consistently reduced burdens, simplified systems, and improved inheritance and wealth tax treatment moving sharply upward. Extremadura and Andalusia are held up as the clearest examples of successful reform strategies, while Castilla-La Mancha, Asturias, and Catalonia illustrate the costs of stagnation or heavier taxation. The next round of reforms will likely determine whether the gaps between Spain's four distinct fiscal groups continue to widen or begin to narrow in the years ahead.