The Spanish Wealth Tax or Impuesto al Patrimonio is a tax that taxes personal wealth and whose management corresponds to each of the Comunidades Autónomas in Spain. There are 17 Comunidades Autónomas in Spain, for example: Madrid, Andalucía or Catalonia. If you reside in Spain for over 183 days with a Spanish Non-lucrative visa, Golden Visa, or Digital Nomad Visa, you may have to pay the Spanish Wealth tax.
One of the taxes that has caused the most talk in recent months is the Wealth Tax. It is a tax that is levied on the personal assets of individuals and is calculated taking into account the value of all their assets. However, it does not work the same in all autonomous communities, as it is a tax that tends to disappear in neighboring countries. In this article we will describe what this tax is and how the Spanish Wealth Tax works.
What is the Spanish Wealth Tax?
The Spanish Wealth Tax is a direct tax associated with individuals and their wealth. Taxes the set of goods and rights of economic content of which the taxpayer is the owner, with deduction of the charges and liens that decrease their value, as well as the personal debts and obligations for which the owner must respond.
The Wealth Tax Law is governed by the Law 19/1991, of June 6 and its management is autonómico (each comunidad autónoma applies it in different ways), which entails, as we will see, important differences in its application.
Spanish Wealth Tax vs. Personal Income Tax
It’s critical to understand how the Wealth Tax differs from the Personal Income Tax (IRPF). While the IRPF levies annual income, the Wealth Tax is computed by taking into account the value of each person’s personal assets, with some exceptions. Therefore, the two taxes complement each other.
How is the Spanish Wealth Tax calculated?
The Spanish Wealth Tax accrues on December 31st every year. This means that the assets that are taken into account are those that the taxpayer possesses on that specific date.
To comply with this tax obligation, it is necessary to present the Model 714, following the same tax calendar applicable to the Income statement.
When accounting for your assets, certain assets are easy to value: bank accounts, shares, investment funds… In the case of real estate, the situation is complicated and we must take the maximum value between:
- The cadastral value consigned in the receipt corresponding to the previous year of the Real Estate Tax (IBI – Impuesto sobre Bienes Inmuebles). Depending on the location of Spain, this tax rate ranges from 0.4% to 1.1% and is determined using the catastral value set by the town hall. (Examples: A large villa can cost around 2000€ per year, compared to about 400€ for a three-bedroom apartment.)
- The determined or verified value by the Administration for the purposes of other taxes, such as, for example, the Tax on Patrimonial Transfers and Documented Legal Acts or the Inheritance and Donations Tax.
- The price, consideration or acquisition value
Regarding debts, they will be valued at their nominal value on the tax accrual date and can only be deducted when duly justified.
Lastly, if you wonder What are the assets that are part of your wealth? and that therefore, they must be accounted for in order to assess whether or not you are subject to the payment of the tax, in general (there are important exceptions), you must account for your real estate; your bank deposits; your shares or shares in your own funds; your life insurance and temporary or life annuities; your jewelry, furs, art objects and antiques; your vehicles of more than 125 cc, aircraft and boats; or your real rights and administrative concessions.
The Spanish Wealth Tax is regulated by the Spanish Autonomous Communities
For many people it is an unknown tax since, in practice, it does not apply in all autonomous communities nor to the majority of Spaniards, since its management is ceded to each community and is designed to tax the big fortunes.
Only after certain amounts, normally high, it is necessary to present the corresponding model or form and pay, where appropriate, the amount stipulated by the regulations of the autonomy where the taxpayer pays his taxes.
This is the reason why there may be different minimum exemptions in each autonomy. It is also possible to apply different deductions and allowances, define different tax rates and, in practice, eliminate the application entirely as is the case with the Wealth Tax in the Community of Madrid or Andalucía, where there is a one hundred percent bonus deduction for this tax.
It is precisely the great regional differences that led the Government to propose a unification of this tax and, finally, to design the new Tax on Great Fortunes with which assets of more than three million euros will be taxed so that they cannot be exempted by the bonuses of regional governments.
Wealth Tax by Regions in Spain
These are some key data on the Wealth Tax by Autonomous Communities. Regarding the rates, each table approved in each autonomy will be applied, which does not always coincide with the State one:
Andalusia
- Minimum exempt: 700,000 euros
- New: When the taxpayer is considered a person with a disability, the exempt minimum is set at:
- 1,250,000 euros if the degree of disability is equal to or greater than 33% and less than 65%
- 1,500,000 euros if the degree of disability is equal to or greater than 65%
Aragon
- Minimum exempt: 400,000 euros
- 99% discount for people with disabilities who hold ownership of protected assets regulated by Law 41/2013, on the share that proportionally corresponds to the assets or rights included in said assets, with a limit of 300,000 euros. For the rest of the patrimony, there will be no bonus.
Asturias
- Exempt minimum: 700,000 euros
- Reduction of 99% of the part of the quota that corresponds to assets and rights that are part of the specially protected patrimony of the taxpayer
Balearic Islands
- Exempt minimum: 700,000 euros
- Reduction of 90% of the proportional part of the quota that corresponds to the ownership of freehold of the goods for cultural consumption to which reference is made to article 5 of Law 3/2015, which regulates cultural consumption and the cultural, scientific and technological development patronage, and tax measures are established
Canary Islands
- Exempt minimum: 700,000 euros
- The assets and rights of economic content that are part of the specially protected patrimony of the taxpayer are declared exempt when they are computed for the determination of the taxable base of the taxpayer.
Cantabria
Exempt minimum: 700,000 euros
Castilla y Leon
- Exempt minimum: 700,000 euros
- Exemption of assets and rights that are part of the specially protected patrimony of the taxpayer, in accordance with the provisions of Law 41/2003, on the patrimonial protection of people with disabilities
Castilla la Mancha
Exempt minimum: 700,000 euros
Catalonia
- Minimum exempt: 500,000 euros
- Reduction of 95% of the quota that corresponds proportionally to the forest properties, as long as they have a management instrument duly approved by the competent forest administration in Catalonia
- Discount of 99% in the part of the quota that proportionally corresponds to assets or rights of economic content that are part of the protected heritage constituted under Law 25/2010, of the second book of the Civil Code of Catalonia, relative to the person and the family
Extremadura
- Minimum exempt: 500,000 euros
- Exempt minimums for disabled people are regulated:
- 600,000 euros if the degree of disability is between 33% and 50%
- 700,000 euros if it is between 50% and 65%
- 800,000 euros if the disability exceeds 65%
Galicia
- Exempt minimum: The state of 700,000 euros.
- There are different deductions for the creation of new companies or expansion of the activity of recent companies. Also for shares in the social capital, loans made in favor of certain companies or guarantees that the taxpayer personally constitutes in favor of these entities, among other points.
Madrid
- Exempt minimum: The state of 700,000 euros
- 100% bonus, therefore the residents of this community will not have to pay for this tax. However, taxpayers who have assets and rights whose value adds up to more than 2,000,000 euros will have to submit a declaration.
Murcia
- Exempt minimum: 700,000 euros
- New: Deduction of 100% of the amount in money allocated during the year after the accrual date to projects of exceptional regional public interest. For the application of this deduction, proof of deductible contributions will be required, which will be justified by certification issued by the beneficiary entity. This deduction will be applied to tax accruals that occur on December 31, 2021.
The Rioja
- Exempt minimum: T700,000 euros
- Deduction of 25% if, among the assets or rights of the taxpayer, there were any that had been or were going to be assigned during the year after the date of accrual of the tax to the constitution of a foundation or expansion of the foundation endowment of an existing one , as long as it is domiciled in La Rioja and registered in the census of patronage entities and activities and pursues purposes included in the Regional Patronage Strategy
Valencian Community
Exempt minimum: 500,000 euros or 1,000,000 euros for taxpayers with mental disabilities with a degree of disability equal to or greater than 33% and for taxpayers with physical or sensory disabilities with a degree of disability equal to or greater than 65%.
Basque country
With the approval in 2018 of the Wealth Tax in Gipuzkoa, the three territories aligned the only tax that they had kept out of harmony.
In Álava and Bizkaia, the tax base will be reduced by 800,000 euros by way of the exempt minimum, while in Gipuzkoa it is established at 700,000 euros.
There is a whole range of exemptions in each territory.
Navarra
- The exempt minimum is set at 550,000 euros
- Exemptions:
- Exemption of habitual residence: 250,000 euros
- Exemptions Similar to the State Rule for Family Businesses
Taxpayers whose tax quota results to enter or when, not given this circumstance, the value of their assets or rights determined in accordance with the tax regulations is greater than 1,000,000 euros are obliged to present a declaration.
The map of the Spanish Wealth Tax deductions
Madrid and Andalucía, which are colored in dark blue, offer a complete exemption from the wealth tax. Consequently, if you are required to pay the tax due to exceeding the minimum exemption threshold, you will only be obligated to declare your assets, but you will not be liable to pay anything.
How much money does the Spanish Wealth Tax bring in?
Taking data from 2019 (the last one for which there are official figures published by the Tax Agency), in that year only 212,284 declarations were filed for an average net worth of almost 3.5 million euros.The collection was almost 1,200 million euros or 1.2 billion €, a very small amount compared to the 86,892 million or 86.9 billion € euros corresponding to personal income tax or the 71,538 million euros or 71.5 billion € corresponding to VAT in the same year.
Who must pay the Spanish Wealth Tax?
In general, you must comply with the regulations of your autonomous community before presenting the model and, although there are some lines marked at the state level that can guide you, be careful because they may not work that way in your autonomy: it is best to go to a tax advisor to avoid errors and contemplate any particularity that benefits you. For example, the exemption of certain assets, different minimum exemptions for People with disabilities, etc.
At the state level:
- There is a State exemption of 300,000 euros that applies to the habitual residence. Therefore, only the value that exceeds this amount will be counted as assets, as well as the properties you own that do not constitute your habitual residence.
- Once these 300,000 euros have been deducted (if your home is worth less, you simply will not have to count it as part of your assets), there is a minimum general exemption of 700,000 euros which applies regardless of the above exemption. Keep in mind that in some autonomies this exempt minimum varies and may be lower. For example, in Catalonia it is 500,000 euros and in Aragon, 400,000 euros.
In principle, unless your regional law says otherwise, only if you overcome these two barriers will you be subject to this tax and you must present the corresponding model, but there is an exception: you will be obliged to declare the Wealth Tax when your gross assets (that is, without discounting your debts or previous exemptions) exceeds two million euros.
Also, keep in mind that assets are not accounted for family businesses, whether business or professional, as well as shares in entities qualified as such family businesses.
In order to know if you are subject to the Spanish Wealth Tax, you must add the value of all your assets and rights, discounting the exempt minimums, as well as your debts. You will thus obtain the taxable base and to this sum to which you must apply the different tax rates applicable to each section. You can also apply the corresponding bonuses or reductions.
Also keep in mind that, in the case of marriages in gananciales regime (Profit regime or joint marital property basis regime), the assets of the marriage belong to each of the parties at 50%. Once the assets are divided between two, each of the members of the couple can calculate whether or not they are subject separately: the exemptions are not divided, but are applied in full to each person.
For example, if there is a home worth 400,000 euros owned by the joint venture, both of you will be exempt, since the 200,000 euros that correspond to each part of the couple do not exceed the exempt minimum of 300,000 euros that applies to each of you.
The Beckham law or Ley Bekham wealth tax exemption
As we describe in our article The Beckham Law: how to pay less taxes in Spain as a foreigner, if you adhere to the Beckham Law special tax regime, the Spanish Wealth Tax will only apply for assets located in Spain, which can be an important consideration for those who have assets in other countries. This special tax regime is going to be very popular, especially, among Digital Nomads who come to live to Spain, that potentially can benefit from this beneficial tax regime.
