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Wealth tax may catch you by surprise, as Spain is one of the few countries in which this extra tax is approved. Both residents and non-residents are subject to paying Spanish wealth tax. This tax does come with a series of Allowances, which means that many people are exempt from this tax, however, for wealthier individuals, it can have a significant impact.
The rules vary depending on your residency status in Spain and the region you are in, as several Spanish autonomous regions, including the Comunidad Valenciana, have their own tax laws in force, which allow them to set their own tax-free allowances and deductions or establish the levied tax rate they see fit.
Taxable persons not resident in Spanish territory, when they operate through a permanent establishment or when the tax authorities requires it due to the amount and characteristics of the taxpayer’s assets located in Spain, have the obligation to appoint a representative before the tax authorities in relation to their obligations for this tax.
A taxpayer’s wealth takes into account the total net value of all assets. However, there are different rules that apply to calculate each individual value, depending on the type of asset. For example, homes are valued at the highest value between the purchase price, cadastral value or value set by the administration, whereas bank accounts will be valued by the highest balance between the 31st December and the average balance of the last quarter.
Once the assets have been valued, the allowances are applied. Also, Spanish Wealth tax is a progressive tax, so the higher the wealth the higher the tax.
Below you will find two tables comparing the National tax rate, which ranges between 0.20% and 3.50%, and the tax rate in the Comunidad Valenciana which varies very slightly ranging between 0.25% and 3.50%.
As mentioned above, there are certain assets that are not subject to Wealth Tax. There are not many, but it is an aspect that can be taken into consideration before making any purchase or investment in order to reduce the amount of Wealth Tax payable.
However, if we want to reduce the amount of Wealth Tax payable, we can opt for another way of doing so, it is more complicated but also more effective.
This option consists of restructuring our investments. What is this specifically? There are some assets that can be taken into consideration within a period of time under the Spanish Wealth Tax laws. This implies that the sum of the full Wealth Tax liability together with the Personal Income Tax liability may not exceed 60% of the sum of the general and savings taxable bases for Personal Income Tax.
This limit is exclusive for all those taxpayers who are subject to the tax by personal obligation. Taking this into account we can play with our investments to reduce the cost of our Wealth Tax.
Those required to submit a wealth tax declaration form in Spain will have from April to June 30th of each year, coinciding with the income tax period.
The IP is a strictly individual tax, so a married couple must submit one form each and for example the ownership of the property and rights which are common to both, shall be attributed in half to each of them. The form to be sent is the form 714.
Please note that tax rates, scope and reliefs may change and we advise that you to seek professional advice from Tax advisors who can take care of the Wealth Tax for you.
Regulated by Law 38/2022 of 27th December.
The Temporary Solidarity Tax on Large Fortunes is a direct tax, individual and complementary to the Wealth Tax, which is levied on the net wealth of individuals with a value in excess of 3,000,000 euros, under the terms set out in this article.
For the purposes of this tax, the net wealth of an individual shall be constituted by all the assets and rights of economic content that they own, deducting any charges and encumbrances that reduce their value, as well as the personal debts and obligations for which they are liable.
The Temporary Solidarity Tax on Large Fortunes shall be applied throughout Spanish territory, without detriment to the tax systems in force in the Historical Territories of the Basque Country and the Community of Navarra, respectively, and to the provisions of international treaties or conventions that have become part of the domestic legal system.
This is a temporary state tax for the years 2023 and 2024.
It is due on the 31st December of both years and is submitted between the 1st and the 31st July.
In order to avoid double taxation, Solidarity Tax payers are only liable for the part of their assets that has not been taxed by their Autonomous Region under the Wealth Tax. Thus, a deduction of the amount paid in Wealth Tax is applied to the Solidarity Tax on Large Fortunes. That is, the amount paid in Wealth Tax is deducted from the payment of this new tax.
Net base –Up to Euros | Quota –Euros | Remaining net base –Up to Euros | Net base –Up to Euros |
0.00 | 0.00 | 3,000,000.00 | 0.00 |
3,000,000.00 | 0.00 | 2,347,998.03 | 1.7 |
5,347,998.03 | 39,915.97 | 5,347,998.03 | 2.1 |
10,685,996.06 | 152,223.93 | Onwards | 3.5 |
Before answering this question, we must point out that there is no single answer, as the Autonomous Communities have the power to establish their own wealth taxes. One thing that is the same in any part of Spain is that the higher the wealth, the higher the percentage to be paid, as it is a progressive tax. If we take as an example the national rate, which is applied in those Communities that do not have their own tax, the wealth tax ranges between 0.2% and 3.5%.
Yes, wealth tax in Spain is payable annually and is levied on the total net value of the assets registered on 31 December. Therefore, it is a tax that must be paid in the scheduled period each year as long as we are within the established scales.
Although there are similarities between the two taxes, such as the fact that both are paid annually, they are not the same. While the property tax only accounts for real estate, the wealth tax accounts for all assets: Real estate, bank deposits, investments, all type of assets and rights, etc.
The main difference between these two taxes is that Income Tax is levied on annual income, all the money that has been earned in that particular year; income from real estate (rents), interest, salaries or dividend payments, for example.
Whereas Wealth Tax is levied on the personal fortune or wealth; i.e. the net wealth of individuals, the set of assets and rights of economic content of which they are the owner, minus the charges and encumbrances that reduce their value, as well as the debts and personal obligations for which the owner is liable.
Apart from Spain, Wealth Tax is also paid in other countries such as Liechtenstein, Norway, Switzerland and France, among others.
