Q&A: How does Spain's solidarity tax on wealth work?
In an attempt to help people in Spain weather the economic storm of the cost-of-living crisis, Spain's left-wing government created a new solidarity tax on people with large net fortunes.
Q: What is the solidarity tax on wealth?
A: It's called the impuesto de solidaridad a las grandes fortunas or solidarity tax on large fortunes and it's a tax on individuals with a net worth of more than €3 million. It's not a tax on income, but rather on assets and holdings.
Q: Is this a new tax? When did it come into force?
A: Yes, it's a new and possibly a temporary tax. It become law when it was published in the Official State Bulletin or BOE on December 28th 2022.
READ ALSO: How Spain's new millionaire tax will affect wealthy foreigners
Q: How long will it be in force?
A: In principle, it will be applicable to the tax years 2022 and 2023, although the Spanish government has left open the possibility that, at the end of that period, it may continue.
Q: Who needs to pay Spain’s solidarity tax?
A: All Spanish tax residents who have a net worth over €3 million must pay it. Be aware, it's a tax on worldwide assets, not just what you own in Spain. It also applies to non-residents with Spanish assets above €3 million.
Q: When do I need to pay it?
A: The new solidarity tax applies to the tax years 2022 and 2023 and you will need to present the amount of assets you held on December 31st 2022. The tax will be payable between July 1st and 31st, 2023.
READ ALSO - La Renta: What items can you deduct on your Spanish tax return?
Q: I already pay wealth tax annually, will I be taxed again on top of this?
A: Although this is not the same as Spain’s annual wealth tax, according to tax professionals, you should not have to pay the tax twice.
If you live in a region where you need to pay wealth tax, it will be deductible from the solidarity tax, but if you live in one of the two regions where you don’t pay wealth tax – Madrid or Andalusia, where it’s been abolished – you won’t be able to deduct any.
Q: Can I get any allowances or exemptions?
A: Yes, if you're a tax resident in Spain, according to international tax advisor, Blevins Franks, you can reduce your taxable base by €700,000. If you own your main home in Spain you will also be able to deduct up to €300,000 from the net value of it.
READ ALSO: Nine mistakes to avoid when filing your Spanish tax return
Q: How much will I be taxed?
A: The tax rates are progressive above €3 million. Those with assets worth between €3 and €5 million net will pay 1.7 percent; those with assets worth between €5 million and €10 million will pay 2.1 percent; and those with assets over €10 million will have a tax rate of 3.5 percent.
For example, if an individual who is a resident in Spain has €3.5 million in worldwide assets, then they will likely pay 1.7 percent on the €500,000 which is above the €3 million threshold. If they have €7 million, then they will pay 2.1 percent on the €2 million extra that's above the €5 million threshold.
Spain is one of only a few countries in the world that has a wealth tax for both residents and non-residents, with the threshold set at €700,000 and the tax rising progressively from 0.2 percent to 3.5 percent.
We at The Local Spain are not tax professionals. What we know, we have learned the hard way by researching and reading, but if you have any doubts about your particular situation, it's always best to talk to a lawyer.
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Q: What is the solidarity tax on wealth?
A: It's called the impuesto de solidaridad a las grandes fortunas or solidarity tax on large fortunes and it's a tax on individuals with a net worth of more than €3 million. It's not a tax on income, but rather on assets and holdings.
Q: Is this a new tax? When did it come into force?
A: Yes, it's a new and possibly a temporary tax. It become law when it was published in the Official State Bulletin or BOE on December 28th 2022.
READ ALSO: How Spain's new millionaire tax will affect wealthy foreigners
Q: How long will it be in force?
A: In principle, it will be applicable to the tax years 2022 and 2023, although the Spanish government has left open the possibility that, at the end of that period, it may continue.
Q: Who needs to pay Spain’s solidarity tax?
A: All Spanish tax residents who have a net worth over €3 million must pay it. Be aware, it's a tax on worldwide assets, not just what you own in Spain. It also applies to non-residents with Spanish assets above €3 million.
Q: When do I need to pay it?
A: The new solidarity tax applies to the tax years 2022 and 2023 and you will need to present the amount of assets you held on December 31st 2022. The tax will be payable between July 1st and 31st, 2023.
READ ALSO - La Renta: What items can you deduct on your Spanish tax return?
Q: I already pay wealth tax annually, will I be taxed again on top of this?
A: Although this is not the same as Spain’s annual wealth tax, according to tax professionals, you should not have to pay the tax twice.
If you live in a region where you need to pay wealth tax, it will be deductible from the solidarity tax, but if you live in one of the two regions where you don’t pay wealth tax – Madrid or Andalusia, where it’s been abolished – you won’t be able to deduct any.
Q: Can I get any allowances or exemptions?
A: Yes, if you're a tax resident in Spain, according to international tax advisor, Blevins Franks, you can reduce your taxable base by €700,000. If you own your main home in Spain you will also be able to deduct up to €300,000 from the net value of it.
READ ALSO: Nine mistakes to avoid when filing your Spanish tax return
Q: How much will I be taxed?
A: The tax rates are progressive above €3 million. Those with assets worth between €3 and €5 million net will pay 1.7 percent; those with assets worth between €5 million and €10 million will pay 2.1 percent; and those with assets over €10 million will have a tax rate of 3.5 percent.
For example, if an individual who is a resident in Spain has €3.5 million in worldwide assets, then they will likely pay 1.7 percent on the €500,000 which is above the €3 million threshold. If they have €7 million, then they will pay 2.1 percent on the €2 million extra that's above the €5 million threshold.
Spain is one of only a few countries in the world that has a wealth tax for both residents and non-residents, with the threshold set at €700,000 and the tax rising progressively from 0.2 percent to 3.5 percent.
We at The Local Spain are not tax professionals. What we know, we have learned the hard way by researching and reading, but if you have any doubts about your particular situation, it's always best to talk to a lawyer.
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