Wealth Tax

Wealth Tax in Five Minutes

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Do you need to pay Wealth Tax? The answer is probably YES.

What is Wealth Tax?

Wealth Tax is an annual tax, payable on the total net value of your assets held on 31st December.

Who pays Wealth Tax?

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 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.

As a resident you:

  • Pay tax on worldwide assets.
  • Have ample tax allowances.
  • Are entitled to a 600,000 € deduction per person in the C. Valenciana (700.000 € in Murcia).
  • Are entitled to a deduction of 300,000 € per owner on your main home.
  • Are required to submit the wealth tax declaration:
    • If after applying these allowances, the net result is positive.
    • If the total gross value of your goods exceeds 2 million euros.

As a non-resident you:

  • Pay tax on Spanish assets only.
  • Are subject to National Law and not the Law of the regions where the assets are located. (However, if you are a resident of the EU or EEA (EU countries + Norway, Liechtenstein and Island) then you will be allowed to apply the tax rules associated to the autonomous region in which your assets with greatest value are located)
  • Otherwise, you are entitled to a 700,000 € deduction per person.
  • Are required to submit a wealth tax declaration:
    • If after applying these allowances, the net result is positive.
    • If the total gross value of goods in Spain exceeds 2 million euros.

What is included in your Estate?

Some of the main assets that are levied by this tax include:

  • 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

Assets exempt from wealth tax

  • Household contents (excluding those above)
  • Economic rights in some instruments such as pension rights
  • Shares in entities, listed or unlisted, with the following requirements:

 

  1. The company is a trading company
  2. You own at least 5% of the share capital (or at least 20% including shareholdings belonging to a spouse or other family members)
  3. You carry out managerial duties for the company
  4. You derive a salary for such activities which is at least 50% of your total net earnings

 

  • 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

How is Wealth Tax calculated?

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 0.2% and 2.5%, and the tax rate in the Comunidad Valenciana which varies very slightly ranging between 0.25% and 3.12%.

wealth tax

When do I have to submit my Wealth Tax Declaration?

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

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

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