Personal Tax Spain: Wealth Tax (Model 714)

Introduction

The wealth tax, or “impuesto de patrimonio,” is a direct levy on personal assets. While common in Spain, it can be unfamiliar to foreigners and presents unique challenges due to regional variations. Taxable assets include real estate, investments, vehicles, and more. Residents with assets exceeding €700,000 must file a declaration, though thresholds may differ across regions. Non-residents with property in Spain must also declare. The tax is progressive, with rates varying by region and asset value. Understanding valuation methods and available allowances is crucial. Declarations are due by June 30th, with asset values determined as of December 31st of the previous year.

What is It?

The wealth tax or “impuesto de patrimonio” is a direct and personal tax on the value of personal assets. Fiscal residents in Spain have to declare their worldwide assets and non residents with properties in Spain have to declare their assets in the country. Most european countries do not have this tribute, so if you are a foreigner in Spain this might be new to you and can cause an unpleasant surprise if you do not watch out.

Besides, in Spain, this tax is transferred to the Autonomous Communities and these can modify deductions and allowances, resulting in a heterogeneous and confusing fiscal landscape. This also means that you should be aware of where you live in Spain since this can have important fiscal consequenses.

Wealth tax is to be paid on top of other taxes like personal income tax, inheritance tax or capital gain tax, so do not make the mistake to think that by just doing your annual tax declaration you are out of the woods.

Taxable assets are real estate properties or rights, savings, investments, cars, yachts, jewelry, art and similar items. Not taxable are for example household furniture and appliances, commercial assets, intellectual property rights and pension funds or rights.

Who has to Submit?

Wealth tax is an individual tax that must be submitted individually, even if you are married under a communal arrangement. As a general rule, you are obliged to present a declaration if you own assets for a net value over €700.000 if you are a resident in Spain. Again, there may be differences between the autonomous regions. For example, in Catalonia the threshold is set at €500.000.

If you are a resident in Spain and own your main residence, there is a reduction of €300.000 of your taxable base. If you are a non resident however, this reduction does not apply as it is assumed that in this case your main residence is located in another country.

Even if the sum of your net assets is below the threshold, you might have to submit a declaration. This is the case if the gross value of the combined assets exceeds a certain amount (generally €2.000.000). In this case the declaration is informative only and no tax will have to be paid, but you can get fined for not presenting the declaration.

What are the Rates?

Like the personal income tax, the wealth tax is a progressive tax, meaning it is composed of tax scales that increase as the value of your combined net assets increases. The state scale runs from 0,2% on the lowest scale to 3,5% on the highest scale, but some autonomous communities apply different percentages that are even higher. As of 01/01/2021 the state scales to be applied are as follows:

On the bright side, there are communities that apply parcial or full allowances with Madrid leading the pack applying a 100% allowance or La Rioja applying a 75% allowance. If you are a non resident however, these allowances do not apply and you will be required to pay according to the state scales.

Furthermore, the taxable amount depends on the valuation method applied. Different valuation methods may apply depending on the type of asset and the guidelines provided by the tax agency or legal jurisdiction and can lower your taxable base.

Apart from the type of valuation applied, there might be other options to reduce your taxable base like investing in certain assets that are tax exempt or restructuring your investments taking into consideration the limitations on wealth tax relative to your overall taxable base.

As you can see, even a relatively simple tax like this one can become quite complicated in Spain and it is wise to consult a professional in case of doubt.

When is it Due?

Like personal income tax, this tax must be filed before the 30th of June. As there may be a substantial amount of documentation to be gathered and translated, we recommend to start preparing early. For example, we require information to be delivered by May 1st in order to prepare this declaration for our clients.

The date of validation of your assets is December 31st of the previous year. In this sense, if assets are to be moved for fiscal optimization, this is a date to take into account.

What Documentation to Prepare?

An Spanish wealth tax declaration is an extensive document and updated details are requiered on a number of items. It is therefore important to start gathering the information as early as 3 months before the presentation deadline. Please find below an overview of the information typically required:

A. Residence and other real estate

• Purchase value real estate and copy last IBI (property tax) assessment in Spain.
• Balance mortgages and loans on the 31st December.

B. Saving accounts, investments and life insurances

• Saving accounts and deposits: average balance last quarter and balance 31/12.
• Investment portfolio: listed values on the end of the year.
• Value life insurance on 31st December

C. Other

• Market value of jewellery, fur, boats and vehicles.
• Shares in unlisted companies. We inform you about the valuation.
• Other possessions, rights and particularities.

Contact us if you requiere more information or if you would like us to assist with preparing and presenting your tax declarations.