Wealth Tax in Spain 2023 ※ 【 All you need to know 】 (2024)

Are you living in Spain and do you wonder if you have to pay wealth tax? The answer is probably yes, but let’s start from the begining.

Wealth tax may catch you by surprise, as Spain is one of the few countries in which this extra tax is approved. Both residents and non-residents are subject to paying Spanish wealth tax. This tax does come with a series of Allowances, which means that many people are exempt from this tax, however, for wealthier individuals, it can have a significant impact.

The rules vary depending on your residency status in Spain and the region you are in, as several Spanish autonomous regions, including the Comunidad Valenciana, have their own tax laws in force, which allow them to set their own tax-free allowances and deductions or establish the levied tax rate they see fit.

Main assets levied by the Wealth Tax

• Real estate
• Bank deposits and investments
• Assets and rights owned by individuals related to professional or business activities
• Luxury assets such as jewellery, fur coats, boats, fast cars and other vehicles
• Art objects and antiques
• Life insurance, life annuities and temporary annuities
• Royal rights, administrative concessions and intellectual property rights

Spanish Wealth Tax exemptions

• Household contents (excluding those above)
• Works of art and antiques
• Economic rights in some instruments such as pension rights
• Business assets when they derive from a professional activity that must constitute your main source of income and must be carried out your own account and on a habitual basis.
• Intellectual property rights in the author’s ownership
• Shares in entities, listed or unlisted, with the following requirements:

1. 1. You own at least 5% of the share capital (or at least 20% including shareholdings belonging to a spouse or other family members)
   2. You carry out managerial duties for the company, perceiving a salary for such activities which is at least 50% of your total net earnings.
   3. Can´t have as its principal activity the management of movable or immovable property.

A taxpayer’s wealth takes into account the total net value of all assets. However, there are different rules that apply to calculate each individual value, depending on the type of asset. For example, homes are valued at the highest value between the purchase price, cadastral value or value set by the administration, whereas bank accounts will be valued by the highest balance between the 31st December and the average balance of the last quarter.

Once the assets have been valued, the allowances are applied. Also, Spanish Wealth tax is a progressive tax, so the higher the wealth the higher the tax.

Below you will find two tables comparing the National tax rate, which ranges between 0.20% and 3.50%, and the tax rate in the Comunidad Valenciana which varies very slightly ranging between 0.25% and 3.50%.

As mentioned above, there are certain assets that are not subject to Wealth Tax. There are not many, but it is an aspect that can be taken into consideration before making any purchase or investment in order to reduce the amount of Wealth Tax payable.

However, if we want to reduce the amount of Wealth Tax payable, we can opt for another way of doing so, it is more complicated but also more effective.

This option consists of restructuring our investments. What is this specifically? There are some assets that can be taken into consideration within a period of time under the Spanish Wealth Tax laws. This implies that the sum of the full Wealth Tax liability together with the Personal Income Tax liability may not exceed 60% of the sum of the general and savings taxable bases for Personal Income Tax.

This limit is exclusive for all those taxpayers who are subject to the tax by personal obligation. Taking this into account we can play with our investments to reduce the cost of our Wealth Tax.

Those required to submit a wealth tax declaration form in Spain will have from April to June 30th of each year, coinciding with the income tax period.

The IP is a strictly individual tax, so a married couple must submit one form each and for example the ownership of the property and rights which are common to both, shall be attributed in half to each of them. The form to be sent is theform 714.

Please note that tax rates, scope and reliefs may change and we advise that you to seek professional advice fromTax advisorswho can take care of the Wealth Tax for you.

The Temporary Solidarity Tax on Large Fortunes is a direct tax, individual and complementary to the Wealth Tax, which is levied on the net wealth of individuals with a value in excess of 3,000,000 euros, under the terms set out in this article.

For the purposes of this tax, the net wealth of an individual shall be constituted by all the assets and rights of economic content that they own, deducting any charges and encumbrances that reduce their value, as well as the personal debts and obligations for which they are liable.

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