The tax system in Spain can be complicated, but it’s even more complicated for foreigners who may have assets located in different countries or only spend part of the year here.
One rule has become a little bit clearer though after the Central Economic-Administrative Court (TEAC), part of Spain's Ministry of Finance, has changed its policy to allow foreigners to pay taxes in Spain according to the rules of the region where they have the majority of their assets.
This even applies to non-residents living outside the European Union.
READ ALSO: Everything you need to know about Spain's wealth tax
In a recent ruling, the court ruled in favour of a foreigner who paid €23,250 in wealth tax in 2020, but later requested a refund from Spanish tax authorities because the region in which most of his assets and rights were located applied a 100 percent tax rebate.
The taxpayer argued that the Treasury's position discriminated against the free movement of capital upheld by the Treaty on the Functioning of the European Union (TFEU), imposed by the Court of Justice of the European Union (CJEU) and upheld by the Supreme Court.
Wealth tax or el impuesto de patrimonio in Spain applies to both residents and non-residents. It is paid by those with a net wealth of at least €700,000 or more and is calculated yearly on December 31st.
Residents must pay taxes on their global assets, whereas non-residents are only taxed on assets located within Spain, but everyone across Spain can also claim an allowance of €300,000 for each owner against the value of their primary residence.
READ ALSO: Which regions in Spain have the best wealth tax conditions?
The general rates range between 0.20 and 3.50 percent, depending on how much your assets are worth.
One important point to note though is that regional governments have the right to set their own tax allowances, below which wealth tax is not payable.
For example, there are several regions that have introduced 100 percent wealth tax relief. This is the case in Andalusia, Canatabria (for those with assets under €3 million), Extremadura and Madrid.
So now, say if you live in Catalonia, but have the majority of your assets such as your home, car, bank accounts etc in Andalusia, you may be able to benefit from the tax relief in Andalusia, instead of paying it in full in Catalonia.
To get around this and other court rulings, however, the Treasury is allegedly speeding up the resolution of requests for Wealth Tax appeals in order to avoid refunds, according to a report in financial news site El Economista.
They reportedly want to ensure that taxpayers' files are closed as soon as possible and thus avoid refunds in the event of a ruling by the courts which may annul it.
READ ALSO: Five key tax changes for people living in Spain's Valencia region
"This is happening with Catalan tax authorities, in other administrations, and even in the rectifications that go through the State, which are those of non-residents. The Treasury is rushing to reach a final decision, either so that people get tired along the way or so that the issues are resolved through economic-administrative or judicial channels and are completed before a ruling from the Constitutional Court," CEO of CIM Tax & Legal, Carlos Muñoz told El Economista.
Once someone has appealed their wealth tax claim to the Treasury and received a negative response, they must then go to the regional economic-administrative courts. Experts now say that resolutions are also being processed very quickly - down to six months from one and half to three years.
Comments