Whether you live in Andalusia, Mallorca, Costa Blanca, Costa Brava, or the Canary Islands – Wealth Tax may affect you. It is therefore critical to understand Spain’s wealth tax rules.
It’s worth noting that Spain is and will continue to be a popular destination for expatriates, particularly those looking to make the most of their golden years.
There are numerous advantages to living in Spain, and the huge range of properties and locations means everyone can find a suitable home.
But what is wealth tax in Spain, and what are the rates and exemptions? We explore the key issues below.
You may also find our main page on personal finance in Spain helpful.
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About Sam Daynes: He has been a financial adviser for over 23 years. He enjoys spending time with his clients, to really understand their needs, requirements and goals. In doing so, this ensures he builds individual, tailor-made solutions. Through his many years of experience, he has developed an in-depth understanding of all aspects of the financial sector.
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What is Wealth Tax in Spain?
As the name implies, a wealth tax is a direct tax imposed on wealthy individuals with the aim of reducing wealth inequality. Spain’s wealth tax is progressive.
The idea is that the more valuable your assets are, the greater the taxation you will be subject to. Spain’s wealth tax ranges from 0.2% to 2.5%
This tax is separate from income and capital gains taxes in Spain.
Wealth tax is paid on an annual basis. You could pay Wealth Tax if your total assets are worth more than €1,000,000. The tax is payable on worldwide assets for Spanish residents. For non-residents, the tax is payable only on Spanish assets.
With careful planning it is possible to reduce or even eliminate Wealth Tax entirely.
Wealth Tax Rates and Allowances in Spain
A personal tax-free allowance of €700,000 is available to both residents and non-residents.
Residents of Spain are eligible for an additional allowance of up to €300,000 against the value of their primary residence. Married couples who live together and own homes may enjoy a €2 million tax-free exemption.
The wealth tax rates and allowances vary between the Autonomous Regions. There follows an example for Andalucia:
- Andalucía: On assets up to €167,129, progressive rates start at 0.2% and escalate to 2.5% per cent on assets beyond €10,695,996.
Note: These tariffs are different in each Autonomous Region; therefore, it is important to establish what the rates are in the Autonomous region where you live. Contact us for further information with regard to wealth taxes in your area.
Exclusions and Limits to Wealth Tax
Wealth tax is exempted for:
- Contents of the home (other than items like art and vehicles)
- Pension entitlements (other than purchased annuities)
- Shares in family businesses and other commercial assets (subject to conditions).
- Antiques and works of art, but strict guidelines must be followed.
There is a rule that states that a resident’s total wealth and income tax liabilities cannot exceed 60% of the taxable base or “base inponible” in Spain.
There are certain tax-efficient investments that help to reduce income and wealth tax obligations.
What is the Solidarity Tax and does this replace the Wealth Tax in Spain?
The Spanish Government has recently introduced some new changes that will apply to residents and non-residents. This change is to introduce a Solitary Tax for Great Fortunes (ISGF). You may have heard it referred to as the ‘Spain’s Millionaire Tax’
The Solidarity tax is designed to supplement the current wealth tax and, as such, is not designed to be a replacement. However, some regions such as Andalucía and Madrid no longer charge a wealth tax but will be affected by this new tax.
The new Solidarity Wealth Tax is an individual tax levied across the whole country and not different depending on a person’s region.
The idea of this new Solidarity tax has been brought in to help the government deal with those impacted by globally high energy costs and rising inflation. This new tax will affect people who’s taxable base exceeds 3 million EUR. This will the be a progressive scale. All rates, exemptions and rules are based on the Wealth Tax Law.
There are exemptions when calculating your taxable base and ways that you can structure your finance to potentially protect you from ISGF.
Does the new Solidarity Wealth Tax in Spain affect residents, non-residents or both?
As with Wealth Tax, Solidarity Tax will be payable by anyone is Spanish resident on their entire world wide wealth. With regards to non-residents, the tax is payable on any wealth that is located in Spain. This includes related rights that maybe fulfilled or exercised in Spain. No taxpayer will pay twice for the same assets.
As mentioned, only those with a net wealth of over 3 million EUR are liable (in the case of Spanish residents, this would include all of their world wide assets). As a Spanish resident there are ample tax allowance benefits.
Non tax residents who are located outside the European Union are liable for regional wealth tax regulations. The rules will apply to their assets with the most significant value in whichever autonomous region they are in. Otherwise non resident are entitled to a 700K EUR reduction per person.
When does the Spanish Solidarity Tax start and is it permanent or just temporary?
The Solidarity Wealth tax comes into play from January 2023 and will be applicable on tax declarations made in 2023 and 2024 for the previous tax year. As I’m sure you will be aware, the Spanish tax year runs as a calendar year.
The tax was introduced as a temporary measure in order to raise additional revenue for the current fuel crisis and high inflation. Its initial scope is to cover the 2022 and 2023 tax years. As this is a measure designed to raise additional revenue, it is hard to say whether this will remain temporary. Taxes have previously been brought in on a temporary basis and have then become permanent. My view is that this will be here to stay past the initial proposed period.
What are the rates of the new Solidarity Wealth Tax in Spain?
The rates for the new solidarity wealth tax are as follows:
- 0% for the first 3 million EUR NET worth
- 7% of NET worth between 3 million EUR and 5 million EUR
- 1% of NET worth between 5 million EUR and 10 million EUR
- 5% of NET worth in excess of 10 million EUR
Similar to what is stated in Wealth Tax law, there are exemptions that apply to Net worth. An example of this would be the principal property (up to 300,000 EUR) or the family company.
These can be some large financial numbers for wealthy Spanish residents. There are measures that can be taken to structure your wealth and potentially reduce the taxable amount.
How can I calculate the Spanish Wealth Tax that I may owe?
This is a difficult one to answer as there are so many potential variables. For example, in order to calculate your potential Net wealth and therefore your tax liability, there are lits of areas that are exempt. I have listed some examples below:
- Fixed income securities for EU residents
- Household goods
- Artwork, antiques and articles related to Spanish or regional history.
- Some types of investments with vested privileges. These can include pensions plans, corporate employee welfare plans, some other types of investments.
- Permanent residencies (max 300k EUR)
- Family run companies.
Once the NET wealth of a person is calculated, the rates discussed earlier in this article can be applied. However, it is also important to understand that a person cannot be taxed twice.
It is essential to seek professional advice to help work out your liability and potential ways of decreasing this.
How long has Spain charged a wealth tax and might it be abolished at some point?
Spain first introduced a wealth tax back in 1977. The origins of wealth tax go back a long way, as far as ancient Greece. It was actually abolished in 2008 and then reintroduced on a supposedly temporary basis in 2012.
This makes one aware of the so called ‘temporary’ basis of the Solidarity Tax. Since 2012 it has continued to be extended until the present day. It is a state tax and not a national tax and has seen both Andalucía and Madrid abolish it.
In theory both Wealth tax and Solidarity tax could be abolished but looking at the history of the Spanish tax system, this seems unlikely. There maybe further incarnations of the tax but ultimately the principle of taxation on the wealthy is likely to continue.
When do I have to submit my Wealth Tax Declaration?
The deadline for filing wealth tax self-assessments, regardless of whether this is a payment or refund is the same as that for filing your personal income tax return each year.
Please see schedule below:
- From the 11th April until the 30th June 2023, online filing of the 2022 personal income tax return and also wealth tax
- From the 5th May to the 30th June 2023, the tax agency will be able to prepare your 2022 personal income tax return by telephone. You can make appointment requests from the 2rd May until the 29th
- From the 1st to the 30th June, tax agencies will be able to prepare your 2022 personal tax return at its offices. Please note appointment requests can be taken from the 25th May to the 29th
You can make an appointment in advance by telephone, in person or online. The contact numbers are as follows: 91 535 7326, 901 12 12 24 or 901 22 33 44
Are there ways to reduce or avoid the Spanish Wealth Tax?
There are certainly ways that you can reduce or avoid Spanish Wealth tax in a lawful way. It is prudent to seek financial advice to find out the best way of doing this. As wealth tax is charged based upon your NET wealth, certain deductions can be made to lower the taxable amount. As mentioned earlier in this article, these deductions can include:
- Certain types of investments. By structuring your finances in a correct way, you can look to reduce your liability. There are investment available that can help you do this.
- Household goods. Any household items do not get include in wealth tax calculations.
- Artwork
- Family run businesses.
- Property (up to a maximum of 300,000 EUR
- Intellectual and industrial property rights
- Economic rights
- Spanish historical heritage assets
Anyone who feels that they may be affected by Wealth Tax should seek financial advice. The difference that the correct structuring of your finances could be make can be considerable.
There is a more complex option available where certain types of assets qualify for a term that is under the Wealth Tax legislation in Spain. This means that the total wealth tax cannot exceed 60% of your general and savings ta basis. Once you know this it is possible to restructure investments in such a way to lower or remove the need to pay the tax applied on wealth.
Are there any allowances or exemptions for the Wealth Tax in Spain?
As mentioned above, there are ways to reduce your wealth tax liability. As far as exemptions, there are none. The new Solidarity tax is a tax that is applicable in all autonomous regions and for all resident and nonresident.
If the value of your assets are over 2 million EUR it is mandatory to file a Wealth Tax Form even if you do not owe any wealth tax. Wealth tax has 700,000 EUR exemption and this is increased to 1,400,000 EUR per married couple.
How much is Spanish wealth tax if I live in Andalucía?
The Andalucian government announced on the 19th September 2022 that it would abolish wealth tax in Andalucía. Effectively applying a 100% allowance om wealth tax payable, applicable for all residents and non-residents in Andalucía.
The measures are applied from the fiscal year of 2022. Andalucía, in an attempt to be one of the most desirable places to live in Spain, followed Madrid’s tax policy.
How much is wealth tax if I live in Madrid?
As mentioned previously, Madrid paved the way in applying a 100^ allowance on Wealth Tax. This means that any resident or non -resident in Madrid is no liable for any Wealth Tax. It is unclear whether other regions other than Andalucía will follow in Madrid’s footsteps.
The general view is that the abolishing of this tax will attract people to the region, helping tourism and industry. However, recent world events have meant that there are economic issues that need to be addressed and in order to do this money needs to be raised through taxation. This is the reason that the new Solidarity tax has been introduced. The aim of which is to raise 1.5 billion in revenue.
How much is Spanish wealth tax if I live in Barcelona?
Calculated on the basis of NET assets, fixed rates plus tax rates expressed as a percentage are applied. These general rates vary between 0.2% and 2.5%. However, for residents in Catalonia, the marginal or highest rate is 2.75%.
A breakdown of the exact rates are as follows:
How much does the wealth tax rates in Spain vary from region to region?
As previously mentioned, each individual resident or non-resident has a personal tax-free allowance of 700,000 EUR. However, this figure can vary in different regions.
I have illustrated some examples below:
Balearics – The state allowances are applied. Progressive rates start at 0.28% for assets up to 170,472 EUR. They rise up to 3.45% for assets over 10,909,915 EUR. This is one of the highest rates for most regions.
Cataluña – Individual allowance in this region is reduced to 500,000 EUR so residents and non-residents don’t benefit from the full 700,000 EUR allowance. Applicable rates start at 0.21% and this applies to assets up to 167,129 EUR. It rises to 2.75% on assets over 10,695,996 EUR
Valencia – Again there is a reduction in the personal allowance. This time it is an allowance of 600,000 EUR. Rates start at 0.25%on assets up to 167,129 EUR and rise up to 3.12% on assets 10,695,996 EUR.
Murcia – state allowance applies in this region, however the progressive rates are slightly higher (0.24% to 3%).
As you have read, there are many factors when calculating your potential Wealth Tax. Not only do the regional difference come into play but also the structure of your finances can make a huge difference to your potential liability.
What is very clear for both residents and non-residents is that you should seek financial advice in order to ensure that your assets are structured in the more beneficial way.
Summary
With careful planning, you can use the Spanish tax-compliant arrangements given by tax experts to reduce your tax liabilities. This will enable your investments to present you with a variety of advantages.
Any tax-related statements should be understood in the context of current tax legislation and practices, which are subject to change. You should obtain specialist advice in this area.
The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained in this report constitutes a solicitation, recommendation, endorsement, or offer by HOLBORN or any third-party service provider to buy or sell any securities or other financial instruments in this or in in any other jurisdiction.
This article on Spanish wealth tax has been written By Sam Daynes of Holborn Assets
You can book a FREE consultation with Sam by clicking the link below.
https://calendly.com/sam-daynes/holborn-assets-meeting-
Get Your FREE Financial Review…
We are sure you have found this page because you have concerns or questions about elements of finance and living in Spain.
Why not clear up your nagging doubts and questions by speaking to a professional financial advisor for a free review to establish what help you may require with no obligation.
We have teamed up with financial expert Sam Daynes of Holborn Assets who has kindly offered to help readers of the SpainMadeSimple.com website.
Sam can have an initial chat to establish what help you require. This is bound to help you. Just click the image below and then fill out a few basic details so he can follow up with you.
About Sam Daynes: He has been a financial adviser for over 23 years. He enjoys spending time with his clients, to really understand their needs, requirements and goals. In doing so, this ensures he builds individual, tailor-made solutions. Through his many years of experience, he has developed an in-depth understanding of all aspects of the financial sector.
Contact Sam now by clicking the image below to get a FREE financial review…