Blog

Posted by & filed under Tax advice.

All You Need to Know about Spanish Wealth Tax

Having been abolished in Spain on 1 January 2009, the Spanish government reintroduced wealth tax (impuesto sobre el patrimonio), supposedly temporarily, from 2012 onwards as an emergency economic measure. To do this they simply removed the total exemption to the tax that had previously applied.

Does Spanish wealth tax affect me?

The established threshold for Spanish wealth tax is €700,000. If your taxable wealth exceeds this you will be subject to wealth tax on your net assets. Spanish wealth tax is payable by both residents and non-residents of Spain. Spanish wealth tax is a progressive tax – the higher the wealth, the higher the tax. How much you are charged will also depend on whether you are a Spanish resident or non-resident.

What is my taxable wealth?

Wealth tax is levied on your net assets held on 31 December of each year. Your taxable assets include:

  • Real estate: land and properties.

Real estate is valued on the basis of the highest of the following values: the cadastral value, the market value as assessed by the tax authorities, or the purchase price as listed in the title deed. The highest of these three values is the value that will be taken into consideration for valuing your assets.

  • Assets and rights owned by individuals related to professional or business activities.
  • Bank deposits and investments in all kinds of entities e.g. stocks and savings.

The value of a deposit is taken as the bank balance on 31 December, unless the balance on that day is lower than the average balance of the 4th quarter in which case the latter figure is used.

  • Life insurance, life annuities and temporary annuities.
  • Jewellery, fur coats, cars, yachts and planes.
  • Art objects and antiques.
  • Rights on assets and intellectual property rights (unless in the author´s ownership).

Assets Exempt from Spanish Wealth Tax

  • Property forming part of the Spanish Historical Heritage or the Historical Heritage of Autonomous Communities.
  • Certain art objects and antiques.
  • Domestic items (not including those in the list above).
  • Economic rights in some instruments such as pension rights.
  • Rights deriving from intellectual or industrial property in the author’s ownership.
  • Goods and rights belonging to individuals deemed necessary for their business or professional activity, which must be their main source of income.
  • Shares in entities, listed or unlisted, with the following requirements:
    • That the organisation carries out an economic activity, not just managing movable or fixed assets.
    • That the individual has a share of at least 5% alone or 20% combined with family members.
    • That the entity accounts for more than 50% of the individual’s work-related income.
    • Loans provided they were not used to purchase or invest in assets exempt from Spanish wealth tax.

Spanish Wealth Tax for Residents

Spanish Wealth Tax Allowances for Residents

If you’re a Spanish resident then you will have a tax free allowance of €700,000 plus a €300,000 allowance on your place of permanent residence. If you’re married and you and your spouse own the property jointly then you are each entitled to the €300,000 allowance on that property. So, in effect you will enjoy a total tax free allowance of €2,000,000 between the two of you (€700,000 + €700,000 + €300,000 + €300,000).

Spanish Wealth Tax Rates for Residents

As a Spanish resident you are required to pay Spanish wealth tax on your worldwide assets and are taxed by the local government of your place of residence, rather than the Spanish state. Remember, the wealth tax to pay is not calculated on your total wealth, but on the value of your assets once all allowances have been deducted.

As Andalucía Lawyers is based in Andalusia we have included the wealth tax rates for Andalusia:

Wealth Tax Rates Andalusia

Taxable Base (€) Rate Band Marginal Rate (%) Total Tax Payable at Top of Band (€)
0.00 – 167,129.44 167,129.45 0.24 0.00
167,129.45 – 334,252.87 167,123.43 0.36 401.11
334,252.88 -668,499.74 334,246.87 0.61 1,002.75
668,499.75 – 1,336.999.50 668,499.76 1.09 3,041.66
1,336.999.51 – 2,673,999.00 1,336,999.50 1.57 10,328.31
2,673,999.01 – 5,347,998.02 2,673,999.02 2.06 31,319.20
5,347,998.03 – 10,695,996.05 5,347,998.03 2.54 86,403.58
10,695,996.06 and upwards Upwards 3.03 222,242.73 upwards

Tax Limit for Spanish Residents

There is a limit on how much you can be taxed as a Spanish resident. The Spanish tax regulations state that wealth and income taxes added together cannot exceed 60% of a resident’s total “general and savings” taxable income. If it does, the wealth tax is reduced subject to paying a minimum of 20% of the full wealth tax calculation. However, this does not apply to wealth tax on non-income producing assets, which remains payable in full. This does not apply to non-residents.

Spanish Wealth Tax for Non-Residents

Spanish Wealth Tax Allowances for Non-residents

As a non-resident you’re also entitled to the individual wealth tax allowance of €700,000. If you’re married then you and your spouse will both benefit from this allowance so you’ll be able to claim a €1,400,000 allowance against your assets. However, you aren’t granted any allowance against your Spanish property. This is because as a non-resident, by definition, your Spanish property is not your main place of residence.

Spanish Wealth Tax Rates for Non-residents

As a non-resident you are required to pay Spanish wealth tax only on your Spanish assets. As you’re not resident of any autonomous community you are taxed by the Spanish state rather than local government. Remember, the following wealth tax rates apply only to the amount that exceeds the allowance thresholds.

Wealth Tax Rates Spain

Taxable Base (€) Rate Band Marginal Rate (%) Total Tax Payable at Top of Band (€)
0.00 – 167,129.44 167,129.45 0.2 0.00
167,129.45 – 334,252.87 167,123.43 0.3 334.26
334,252.88 -668,499.74 334,246.87 0.5 835.63
668,499.75 – 1,336.999.50 668,499.76 0.9 2,506.86
1,336.999.51 – 2,673,999.00 1,336,999.50 1.3 8,523.36
2,673,999.01 – 5,347,998.02 2,673,999.02 1.7 25,904.35
5,347,998.03 – 10,695,996.05 5,347,998.03 2.1 71,362.33
10,695,996.06 and upwards Upwards 2.5 183,670.29 upwards

When is wealth tax declared and paid?

Wealth tax is an annual tax, payable on the total value of your taxable assets on 31 December. If you are required to pay wealth tax on your assets you must submit the wealth tax form after the end of each year and pay the tax due between May and June.

Do I need to make a Spanish wealth tax declaration?

There is no need to present a wealth tax declaration if the total of your taxable assets falls under the minimum limit and you’re therefore not required to pay anything. The exception to this is if you possess assets valued at over €2,000,000. In this case, you must make a Spanish wealth tax declaration even if no wealth tax is due on your estate once all allowances have been deducted. Married couples are required to make separate returns declaring both joint and individual assets.

Contact Us

How do I calculate if I am required to pay Spanish wealth tax? How do I prepare my Spanish wealth tax declaration? We can help you! Contact us to arrange a consultation either in our offices or over phone or email.

Related Articles by Andalucía Lawyers