Whether you live in Andalusia, Mallorca, Costa Blanca, Costa Brava, or the Canary Islands – Wealth Tax may affect you. It is therefore critical to understand Spain's wealth tax rules.
It's worth noting that Spain is and will continue to be a popular destination for expatriates, particularly those looking to make the most of their golden years. There are numerous advantages to living in Spain, and the huge range of properties and locations means everyone can find a suitable home.
But what is wealth tax in Spain, and what are the rates and exemptions? Holborn explores the key issues here.
What is Wealth Tax in Spain?
As the name implies, a wealth tax is a direct tax imposed on wealthy individuals with the aim of reducing wealth inequality. Spain's wealth tax is progressive. The idea is that the more valuable your assets are, the greater the taxation you will be subject to. Spain's wealth tax ranges from 0.2% to 2.5%
This tax is separate from income and capital gains taxes in Spain.
Wealth tax is paid on an annual basis. You could pay Wealth Tax if your total assets are worth more than €1,000,000. The tax is payable on worldwide assets for Spanish residents. For non-residents, the tax is payable only on Spanish assets.
With careful planning it is possible to reduce or even eliminate Wealth Tax entirely.
Wealth Tax Rates and Allowances in Spain
A personal tax-free allowance of €700,000 is available to both residents and non-residents Residents of Spain are eligible for an additional allowance of up to €300,000 against the value of their primary residence. Married couples who live together and own homes may enjoy a €2 million tax-free exemption.
The wealth tax rates and allowances vary between the Autonomous Regions. There follows an example for Andalucia:
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Andalucía: On assets up to €167,129, progressive rates start at 0.2% and escalate to 2.5% per cent on assets beyond €10,695,996.
Note: These tariffs are different in each Autonomous Region; therefore, it is important to establish what the rates are in the Autonomous region where you live. Contact us for further information with regard to wealth taxes in your area.
Exclusions and Limits to Wealth Tax
Wealth tax is exempted for:
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Contents of the home (other than items like art and vehicles)
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Pension entitlements (other than purchased annuities)
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Shares in family businesses and other commercial assets (subject to conditions).
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Antiques and works of art, but strict guidelines must be followed.
There is a rule that states that a resident's total wealth and income tax liabilities cannot exceed 60% of the taxable base or “base inponible” in Spain.
There are certain tax-efficient investments that help to reduce income and wealth tax obligations.
Conclusion
With careful planning, you can use the Spanish tax-compliant arrangements given by tax experts to reduce your tax liabilities. This will enable your investments to present you with a variety of advantages.
Any tax-related statements should be understood in the context of current tax legislation and practices, which are subject to change. You should obtain specialist advice in this area.
The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained in this report constitutes a solicitation, recommendation, endorsement, or offer by HOLBORN or any third-party service provider to buy or sell any securities or other financial instruments in this or in in any other jurisdiction.
Holborn Insurance Agents, Sub-Agents & Consultants (Cyprus) Ltd authorised by the Cyprus Insurance Companies Control Services (ICCS) License number 5228. Passported to distribute Insurance activities and services in Cyprus, Spain, France, Malta, Belgium, Luxembourg, Sweden and Portugal.
