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Wealth Tax RE-INTRODUCED IN 2011

Due to the financial/banking crisis worldwide, the Spanish government opted, in 2011, to re-introduce a wealth tax on net assets above €700,000 (£610,000), with a main home allowance of €300,000 (£260,000), although this is not relevant to holiday homes in some regions of Spain.

“Holiday-home owners in regions like Catalonia, Andalucia, The Valencian Community, The Balearics and The Canaries – basically the most popular regions with foreign buyers – will have to pay partimonio [wealth tax] on all net assets above €108,200 [£95,000], unless autonomous governments reform their tax codes before the end of the year,” said Mark Stucklin of Spanish Property Insight.

This is now : Wealth tax is an annual tax, payable on the total value of your taxable assets as at 31st December. If you are resident in Spain you are liable to the tax on your worldwide assets; if non-resident, then only on your Spanish assets.

Each resident individual has a tax free allowance of €700,000 (€800,000 in Isla Baleares and €500,000 in Cataluña), plus a €300,000 allowance on his own home. If a couple owns a property in joint names, each gets the €300,000 allowance.

Non-residents receive the individual allowance of €700,000, but no allowance against their Spanish property.

The state progressive state tax rates range from 0.2% for assets up to €167,129, to 2.5% on assets over €10,695,996. The Autonomous Communities can vary these rates, and the top rate is 3.03% in Andalucía, 3% in Murcia and 2.75% in Cataluña.

The tax is payable on the value of most of your assets, such as real estate, savings and investments, jewelry, art, cars, boats etc.

Some assets are exempt from wealth tax, such as household contents (but excluding jewels, fur coats, vehicles, boats, art and antiques); pension rights (but not purchased annuities); owner managed small businesses and business assets (with conditions). Certain shareholdings are exempt where you carry out managerial duties and derive a salary.

Loans are deductible in calculating your net taxable wealth provided they were not used to buy or invest in assets exempt from Spanish wealth tax.

The wealth tax was abolished in 2008, but the Spanish government felt it was necessary to re-launch it to generate greater revenue from the middle classes with a tax on property and savings, in a bid to help the country’s struggling economy.

As from 2012 it was enforced merely as a “temporary” measure lasting only two years and was to affec an estimated 160,000 taxpayers. In Spain temporary legal measures have been known to last over a century, so I advise this is taken with a pinch of salt. Wealth tax itself was formally introduced in 1977 as a temporary tax and has been going on strong for over three decades now; the irony.

The main points are as follows:

  1. Although the tax modification has been approved by the Spanish central government, the tax will go directly to each Autonomous Community.
  2. Autonomous Communities may legislate in relation to several aspects of Wealth Tax, especially regarding exemptions applicable to taxpayers who have their habitual residence in their territory. Any difference in the exemption limit approved by the Autonomous Community where the taxpayer is domiciled will be applied in first instance (only applicable for Spanish tax residents). This means the Autonomous Community could potentially approve a higher exemption than €700,000. For non-resident taxpayers, the €700,000 exemption will apply. 
  3. The existing exemption regarding the taxpayer’s habitual residence has been increased to €300,000 per person.
  4. Non-resident taxpayers must appoint a tax representative in Spain when they operate in Spain through a permanent establishment, or when the tax office considers it compulsory due to the amount and nature of the Spanish assets they own. If not, a minimum fine of €1,000 can be imposed.
  5. A tax return only needs to be submitted when there is a tax to be paid or when the value of the taxpayer’s assets is higher than €2m, regardless of the result of the tax liquidation.
  6. The first tax returns relate to net wealth held on 31 December 2011, with the tax payable in June 2012.
  7. This reintroduction only applies to tax years 2011 and 2012.
  8. The latest news (November 2015) is that this tax will continue into at least 2016.