In this episode of Confianz: After Hours, we unravel together the complexities of Spain's wealth tax ('Impuesto sobre el Patrimonio'). Discover the differences between residents and non-residents, the tax gap between autonomous regions, and the impact of the "Solidarity Tax on Large Wealth".
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Part 1: The Basics of Spanish Wealth Taxation
Read more about wealth tax in Spain.
- What is it? An annual tax on the total net value of your assets, calculated on the reference date of 31 December.
- No uniform tax: It is a complex interplay of national legislation and the rules of the 17 autonomous regions, leading to a fiscal patchwork.
- Two statutes: The rules differ fundamentally depending on whether you are a tax resident or non-resident.
- Fiscal Resident:
- Who? You spend more than 183 days a year in Spain, or the centre of your economic or family interests is there.
- On what? Taxed on your global capability (your home in Belgium, securities account in the Netherlands, etc.).
- Exemptions (national standard):
- General exemption: €700.000 per person.
- Additional exemption for the main residence (in Spain): €300.000 per owner.
- For a couple, the total exemption can be as high as €2.000.000.
- Non-Resident:
- Who? Someone who lives in Belgium, for example, and has a holiday home in Spain.
- On what? Taxed only on your Spanish possessions (Spanish property, Spanish bank accounts, etc.).
- Exemption:
- Choice between the general exemption of €700.000 per person or the regional exemption.
- No additional exemption for the (second) home.
- Fiscal Resident:
- Duty to declare (Modelo 714): You are required to file a return if:
- Your tax payable positive is.
- Your gross power (before deduction of debts) more than €2.000.000 amounts, even if the final tax is €0 (as in Madrid or Andalusia).
- Modelo 720: A separate declaration requirement for residents with foreign assets of more than €50.000.
Part 2: The Differences between Regions
The region where you live or where your assets are located has a huge impact.
- Madrid & Andalusia: The Fiscal Freeholds
- Rule: Pass a 100% tax credit (bonificación) added.
- Result: You pay in practice €0 to regional wealth tax.
- Catalonia: The Strict Regime
- Exemption (residents): Reduced to €500.000.
- Rates: Higher than the national scale, with a top rate of 3,48% for assets above €20 million.
- Nuance: Non-residents can opt for the more advantageous national rules (€700,000 exemption).
- The Balearic Islands (Mallorca, Ibiza): The Strategic Midway
- Exemption (residents): Increased to €3.000.000 per person (since 2024).
- Strategy: Makes the islands very attractive for wealth below 3 million, but retains a tax burden (up to 3,45%) for powers above that.
- Valencian Community (Costa Blanca): region in transition
- Assessment year 2024: A strict regime with an exemption from €500.000 for residents and rates up to 3,5%.
- BIG CHANGE for 2025: The exemption for residents will be doubled to €1,000,000.
Part 3: The Solidarity Tax on Large Wealth (ITSGF)
- What is it? A additional national tax which was introduced in response to the 100% rebate in regions such as Madrid and Andalusia.
- For whom. Anyone (both resident and non-resident) with net assets of more than €3.000.000.
- How does it work?
- It is a "tax floor". The amount you pay in regional wealth tax is fully deductible.
- Example Madrid: You pay €0 to the region, so you pay the complete Solidarity tax to the state.
- Example Catalonia: The regional tax you pay is usually higher than the Solidarity Tax. You therefore pay €0 To Solidarity Tax.
- Rates:
- 1,7% on assets between €3,000,001 and €5,347,998
- 2,1% on assets between €5,347,998 and €10,695,996
- 3,5% On assets above €10,695,996
- Note for residents: These rates apply to the taxable base after the general exemption of €700,000. The tax therefore effectively affects assets from €3.700.000.
Part 4: Strategy, Optimisation & Final Advice
- The 60% rule (for residents only): Your total burden of income tax and wealth tax should not exceed 60% of your taxable income. This can lead to a reduction in wealth tax by maximum 80%.
Example:
- A resident has net assets of €8 million. His initial computed wealth tax is €112,000. Now suppose his total taxable income in personal income tax (his salary plus some savings income) is €50,000, and he pays €12,500 in income tax on that.
- Now we apply the 60% rule:
- First, we add up the two taxes: €12,500 (income tax) + €112,000 (wealth tax) = €124,500.
- We then calculate the limit: 60% of his taxable income of €50,000 is €30,000.
- We see that his total tax burden of €124,500 far exceeds the limit of €30,000. So the rule kicks in. The theoretical reduction would be €124,500 minus €30,000, i.e. €94,500.
- But now comes the lower limit: the reduction can never be more than 80% of the original wealth tax. 80% of €112,000 is €89,600.
- Because the theoretical reduction (€94,500) is higher than the maximum reduction (€89,600), the reduction is limited to €89,600.
- So the final capital gains tax is: €112,000 minus the maximum reduction of €89,600, amounting to €22,400. That is exactly 20% of the original assessment. So thanks to this rule, his wealth tax is reduced by 80%.
- Exemption for Business Assets: Assets associated with a real, active business can be exempted under very strict conditions.
- End-of-year planning: The reference date is 31 December. Actions such as taking out a mortgage, spreading property or making a donation must be completed before this date.
Five points to remember:
- Your tax status determines everything.
- Location, Location, Valuation: The choice of region is fundamental.
- Solidarity tax is Real and Permanent: It neutralises tax benefits in regions like Madrid for wealth above €3.7 million.
- Planning is Proactive: The deadline is December 31.
- Find Professional Advice: The complexity requires expert guidance.
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