What is Spanish Wealth Tax?
It is an annual tax levied on the total net worth of a person's wealth as of 31st December each year. An individual's net wealth is comprised of all the assets and economic rights owned by him less encumbrances that diminish their value and other allowable deductions such as personal obligations or debts.
Wealth tax is a progressive tax which means the higher the wealth, the higher the rate of tax. People with more wealth are going to pay more taxes than people with less wealth. The wealth tax in Spain is payable by both residents and non-residents.
Wealth tax has been opposed by many as it places an extra burden on residents and non-residents. People argue this tax is an extra liability that they have to pay on their wealth which has been accumulated from the income that has already been taxed. So, it’s a kind of double taxation that they are forced to pay.
Who has to pay Wealth Tax?
Both residents and non-residents have to pay Wealth Tax in Spain. Assets and deductions are different for residents and non-resident individuals. Consider the following information to know which assets are taxable and what are allowed deductions to calculate your wealth tax. Details of wealth tax for resident and non-resident individuals are given below.
Wealth Tax on Residents
Residents of Spain are required by law to pay their wealth tax on their worldwide assets less any allowable deductions.
Resident individuals can take benefits from allowances such as:
General allowance of €700,000/person &
Habitual allowance of €300,000 (doubled for a married couple).
Wealth Tax for Non-Residents
As per the law, non-resident individuals are required to pay wealth tax only on assets located in Spain. Non-resident individuals are entitled to a deduction of €700,000/ person.
How to Calculate Wealth Tax?
Wealth tax is calculated at the end of each year (i.e., 31st December). So, if anything is bought after 1st January and sold before the end of the same year, it will not be held liable for wealth tax.
In Spain, wealth tax rates vary depending on different regions. You need to calculate your total net worth by subtracting the allowed deduction from the value of total wealth. The value obtained from the above calculation will be multiplied by the wealth tax rate in your region to calculate your wealth tax liability.
Wealth Tax = ( Total Net Assets – Total Deductions) * Wealth Tax Rate
If the deductions are more than the amount of assets, then the wealth tax will be zero.
Assets Included in Wealth Tax Calculation
The following assets are considered for calculating Wealth Tax in Spain:
Luxury assets (jewellery, fast cars, boats, etc.)
Vehicles
Antiques and Art objects
Investments
Bank deposits
Real estate
Royalties rights
Assets and rights owned related to business etc.
Exceptions for Wealth Tax
Wealth tax calculations do not incorporate the following assets:
Intellectual property rights
Jewellery and art (in some cases)
Pension rights
Household contents etc.
Navigating the complexities of Spanish Wealth Tax can be a daunting task, especially when considering the implications for both residents and non-residents. With progressive rates based on your total net worth and various deductions and allowances at play, understanding your obligations and optimising your tax position requires specialised knowledge. Whether you're trying to ascertain your liability, maximise allowable deductions, or are simply seeking advice on how to manage your assets effectively under Spain's wealth tax regulations, our experts are here to help.
We offer tailored advice and strategic planning services to help you minimise your tax burden while ensuring compliance with Spanish tax laws. Contact us today to explore how we can assist you in managing your Spanish Wealth Tax efficiently.