Wealth Tax Suppressed From 2009

THEN RE-INTRODUCED IN 2011 FOR 2011 and 2012 FOR THE RICHEST OWNERS

The Government decided to suspend the Wealth Tax in 2009 BUT HAVE NOW AGREED TO REINSTATE THIS TAX BECAUSE OF THE FINANCIAL CRISIS . The declaration is made on Form No. 214.

Adios "Patrimonio"! ONLY FOR THE TIME BEING.

30 years ago the Government introduced the unpopular "Impuesto de Patrimonio" the Spanish version of a Wealth Tax. It was an "extraordinary tax" not supposed to be permanent.   However, the great need of the changing governments for greater income made the tax a fixture in the budgets. During the past years the income from this tax has been used to finance the deficits of Regional Governments and thus the Minister of Finance will have to compensate them for their loss of income.

Most foreign residents, depending on their level of income and value of property,  did not have to pay "Patrimonio" but for the non-resident property owners there was no escape from the form 214 (the combined declaration form for Income and Wealth).

As our readers will know, the non-residents had to appoint a fiscal representative if they did not want to have communications from the fiscal authorities sent to the address of their property in Spain . It has been the fiscal representatives who have collected the tax money due (normally at the beginning of each year) and who have then sent it to the tax man, together with the 214-declaration (normally in the end of the year).

The "income"of the non-residents to be declared on the 214 has in most cases been an imagined income from letting, based on the fiscal value. The "wealth" has been a vacation property used for sporadic visits. By combining the two taxes and introducing some years ago the figure of the "fiscal representative", the Hacienda tried to make sure none of the non-residents escaped the taxes.

From 2009

The Government suspended this tax for 2009.

It is to be expected that some new Rules will come from the Hacienda regarding the Income Tax declaration for non-residents and there will be a new form to replace the 214.  

No tax gifts for retired residents

The tax reductions that the Government introduced in the same Law 2-2008, will NOT be applicable to most foreign residents receiving a pension from their home country, that they then declare in their Income Tax Declaration in Spain. The reason for this is that the tax reduction of 400 € is coupled to the retentions to be made this year, and since the pensions of the foreign residents in almost all cases have no retentions in Spain, a deduction made in such retention cannot be made.

We shall also be looking out for any additional rules or clarification on this point and will inform our readers. We also recommend Residents to take up the matter with their fiscal advisors.

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The threshold has however been raised from previous levels, so that it now targets Spain's wealthier taxpayers. It is also meant to be a temporary measure. So far it only covers the tax years 2011 and 2012 (therefore tax returns and payments due in 2012 and 2013 respectively).

The personal exemption has significantly increased and will now be €700,000 per person (up from €108,182 in 2007). This exemption will now also apply to non-residents of Spain. Couples are assessed to wealth tax separately, and jointly held assets are treated as belonging to each individual on a 50:50 basis, so the threshold for a married couple can be up to €1.4 million.

The main home exemption has also increased, this time from €150,253 to €300,000 (so €600,000 per couple if the property is in joint names). You are only entitled to one main home deduction.

There have been no changes to the tax rates, so they will remain the same as the previous ones, ranging from 0.2% to 2.5%, applicable to your net tax base of wealth owned on 31st December.

Wealth tax can be varied by region to make it more favourable (not more penal) but I would not expect too many concessions in the current economy.

If you are resident in Spain you are liable to wealth tax on your worldwide assets, net of liabilities.

Non-residents are only liable on assets located in Spain - but under the old regime they did not get any of the personal or main home deductions. The new law specifically allows non-residents to benefit from the personal allowance. However, you cannot get the main home exemption if you are not resident in Spain. If you are resident in the UK (for example) and own a holiday home in Spain, it will be liable to wealth tax if its value exceeds €700,000 (or €1.4m if owned jointly). The rates above this figure would start at 0.2%.

Non-residents who operate through a permanent establishment in Spain, or who have a wealth tax liability in relation to their Spanish assets are required to appoint an accredited tax representative resident in Spain to assist with their wealth tax obligations. Failure to do so will incur a €1,000 penalty, and will be increased if the offence is repeated.

When it comes to your property, it is valued at the highest of:

•the officially registered Valor Catastral, or

•the value taken into account for any other tax purposes, or

•the price in the purchase agreement

Liabilities in general reduce taxable wealth, but not where it is a loan used to buy an asset that is specifically exempt or covered by exemptions. So where a mortgage is for the purchase of the main home (the value of which is covered by the main home exemption), no deduction is available for that mortgage.

For a non-resident, only Spanish liabilities are taken into account. A Spanish mortgage would have to be attached to a Spanish property to be deductible for wealth tax purposes.

It is estimated that 160,000 people will be caught by this reinstated wealth tax, which is expected to earn the government over €1.08 billion a year. In 2007 (the last year it was levied) it had brought in €2.1 billion.