Whether you’re a resident in Spain or a non-resident with a property here for example, you may be subject to paying what’s known as wealth tax - el impuesto de patrimonio in Spanish - which is levied on those with large assets.
It’s an annual tax, which must be paid on total net value of your assets held on December 31st of the previous year.
READ ALSO: What’s the difference between Spain’s wealth tax and the solidarity tax?
Who has to pay wealth tax in Spain?
As mentioned both residents and non-residents may have to pay it, but it really depends on where you live in Spain, as each region has slightly different rules on it.
Some regions even set their own tax-free allowances and deductions or establish their own tax rates.
It affects more than 200,000 taxpayers in Spain.
You are required to pay it in one of two cases. The first is after applying for regional allowances, the net result is positive or if the total gross value of your assets exceeds €2 million.
For example, you are entitled to a €700,000 deduction if you live in Murcia and a €500,000 deduction if you live in the Valencia region.
Everyone across Spain can also claim an allowance of €300,000 for each owner against the value of their primary residence.
So, if you apply that deduction, but still have more assets above that amount, then you will have to pay wealth tax on that part or if you have assets worth more than €2 million.
What is wealth tax levied on?
Be aware that for residents this means your worldwide assets, so it would include any properties you own abroad or any bank accounts and savings you have in other countries.
It could also include luxury items such as yachts, sports cars and jewellery, business assets owned abroad or in Spain, life insurance or intellectual property rights and royalties.
If you’re a non-resident then you will only pay wealth tax on your assets that are located in Spain. You can also apply the regional deductions from the region where your property is located, otherwise you are allowed a €700,000 deduction per person.
What is exempt from wealth tax?
Your assets for the purposes of this tax don't include any of the contents of your house (apart from those above), intellectual property rights if you are author of the work, and financial products such as pensions.
How much do I pay?
Spanish Wealth tax is a progressive tax, so the more you have, the higher the tax you have to pay.
The general rates range between 0.20 and 3.50 percent, depending on how much your assets are worth.
The highest rates are payable for those with a taxable base above €10,695 million.
But remember, they change slightly depending on where you live.
When do I have to pay wealth tax?
You will have to declare your assets and pay the tax between from April to June 30th of each year. This coincides with the time you have to do your declaración de Renta or income tax return.
It is typically filed online using Form 714, but it’s important to get a gestor or financial expert to help you complete it as they will know about the specific deductions and allowances in your region and can advise you on your specific situation.
What should I know about recent updates to wealth tax?
You should know that there are currently four legal challenges which threaten to overturn the wealth tax in Spain.
A Constitutional Court ruling which has been pending since 2021 may rule that the Treasury has to pay multimillion-euro refunds for tax large fortunes.
But the ruling has not passed yet so for now you still have to pay it or face possible fines. There are also other challenges in different regions.
It’s important to be on top of the news, however, or ask your gestor to let you know if and when there are any changes.
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