Often clients moving to Spain are faced with wealth tax in Spain (impuesto sobre el patrimonio). Wealth tax in Spain applies to both residents and non-residents.
Like Spanish inheritance and gift tax, wealth tax is also partly regulated regionally. In addition, there are important practical differences for residents and non-residents. We first discuss the general principles of wealth tax, then go over the different aspects for residents and non-residents.
Please note that this article discusses the 1991 wealth tax. The new solidarity contribution for wealth above EUR 3,000,000 is not discussed here.
The video below is a summary of this blog created using artificial intelligence.
General principles
First, it is important to know that there is a non-taxable minimum exists. This means that below a certain threshold, you do not have to pay wealth tax. However, the non-taxable minimum depends on the region. For example, in the Comunidad Aragón the non-taxable minimum is €400,000, in the Comunidad Cataluña 500,000 euros, in the Comunidad Valenciana 600,000 euros and in the Balearic Islands 3,000,000 euros. So not all capabilities are targeted.
The taxable base is the amount that exceeds the non-taxable minimum. An example: for a Spanish resident living in Valencia with total assets of 800,000 euros, the taxable base is 200,000 euros. However, if that same Spanish resident lived in Zaragoza, the taxable base would be 400,000 euros.
On the taxable base, a progressive rate applied. In principle, the maximum rate is 2.5%, but regions may deviate from this. For example, in the Comunidad Valenciana the rate is situated between 0.25% on the lowest bracket to 3.12% on the highest bracket. The first bracket is 0.25% on the 167,129 above the non-taxable minimum. The highest bracket is 3.12% on the amount above EUR 10,695,996.
Update December 2020: the highest rate will be raised to 3.50% for net assets above €10 million nationally from 2021.
Wealth tax in Spain for residents
If you are permanently resident in Spain, wealth tax will apply to all your global assets. So if you move permanently to Spain, and you still have assets in Belgium, know that these assets count towards Spanish wealth tax. In other words, if you have one or more properties in Belgium, you will soon pay wealth tax. An example: you live in Alicante and you have assets in Spain of 400,000 euros and assets in Belgium of 450,000 euros. Spanish wealth tax will then apply to you, with a tax base of 250,000 euros.
As a tax resident, you will still benefit from additional exemptions can enjoy, again depending on the regions. Consider, for example, the family home exemption of €300,000.
The applicable regional tax regime as a tax resident depends on your place of residence in Spain. For example, if you live in Alicante, the tax system of the Comunidad Valenciana apply to you regardless of where your assets are located.
Wealth tax in Spain for non-residents
Even as a non-resident, you are subject to Spanish wealth tax. However, there are some important differences: just your assets in Spain is eligible. In addition, you have a choice between national rules or local rules. Indeed, non-EU residents can opt for the regime of the autonomous region in which most of their Spanish assets are located.
Nationally, the taxable minimum for non-residents is 700,000. Rates range between 0.20% and 3.50%.
An example: you live in Belgium and have a second residence in Alicante. Your assets in Spain amount to 400,000 euros. In addition, you have assets of 550,000 euros in Belgium. In this case, you are not subject to Spanish wealth tax because your Spanish assets do not exceed the non-taxable minimum. However, should you own a property worth 800,000 euros in Spain, you will be subject to wealth tax. You can then choose between the national system or the rules of the Comunidad Valenciana.
What does one understand by 'capability'?
You need to determine your net wealth, i.e. all your assets minus your debts, on 31 December each year. The value of the following assets is taken into account to calculate your taxable wealth: real estate, bank deposits, shares, life insurance policies, investment portfolios, art, jewellery, boats, planes & helicopters, sports cars, concessions and intellectual property rights.
To value property, you should look at the higher of either (1) the cadastral value, (2) the tax-acceptable value or (3) the value in the deed of sale.
The following assets do not count: household furniture, shares in an SME (subject to conditions), shares in a family business (subject to conditions), business property, copyrights and pension rights.
How can I avoid wealth tax in Spain?
There are a number of legitimate ways to avoid wealth tax in Spain. For example, with a bona fide debt, you reduce the value of your net assets. For example, consider a mortgage on a Spanish property.
Even if you transfer assets to a (family) company or holding company, these assets are exempt from wealth tax, provided a number of conditions are met. These conditions include a minimum participation in the company (5% for an individual, 20% by family members in the case of family companies). Also, the assets should be in line with the corporate purpose of the company.
Another way is to move to Madrid or the autonomous region of Andalusia as a resident. If you live in Madrid or Andalusia stay, you are entitled to a capital gains tax rebate of 100%. In other words, de facto there is no wealth tax in Madrid and Andalusia.
How to declare wealth tax in Spain?
As a non-resident with assets in Spain greater than 700,000 euros, you are required to Modelo 714 submit.
If you are a resident in Spain, it is important to declare your foreign assets through Modelo 720. Even if you are not eligible for wealth tax, it is still important not to forget this declaration. After all, there are high fines of at least 10,000 euros for not declaring Modelo 720.
Read more about the wealth declaration for residents in Spain.
Update June 2019: the high sanctions may violate the free movement of persons within the European Union. A lawsuit is currently pending before the European Court of Justice against Spain in which the European Commission is challenging the existence of the sanctions.
Solidarity tax
Since 2022, Spain has had a national solidarity tax - effectively an additional wealth tax - for individuals with net assets higher than €3,000,000.
On the first bracket of EUR 3,000,000 - EUR 5,000,000, the rate is 1.7%. Thereafter, 2.1% up to EUR 10,000,000. On the highest bracket from EUR 10,000,000 onwards, the rate is 3.5%. You can offset the tax due from this tax against the wealth tax paid. The solidarity measure is 'temporary' and applies for 2023 and 2024.
Other taxes in Spain?
When you permanently move to Spain, you may also become a tax resident in Spain. The main consequence of this is that your worldwide income will be taxed according to Spanish rules. Learn more about emigrating to Spain here.
For non-residents, the main taxes are council tax and non-resident tax. The latter tax depends on whether you rent out or not. If you rent out, you pay taxes on the actual rental income. If you do not rent out, you only pay taxes on cadastral income.
You will find more information on the Spanish non-resident tax.
Update December 2023
