Wealth tax
Wealth tax (also known as property tax or tax on the rich) is, as the name suggests, a tax that is paid on a person’s assets up to a certain amount. Unlike personal income tax, asset tax is levied on assets, not on income. Therefore, whether or not a person has to pay wealth tax, has nothing to do with his or her income.
When do I have to file an wealth tax return in Spain?
There are two situations in which you need to file an wealth tax return in Spain:
1. Tax resident in Spain.
A person is resident in Spain for tax purposes if he or she has lived in Spain for more than 183 days per year. The Assets Tax Act requires Spanish tax residents to pay assets tax in Spain if they have worldwide assets of a certain amount.
Related article:Criteria for individuals to be considered tax residents
This means that if you are a Spanish tax resident, it is your worldwide assets that are subject to tax in Spain, regardless of the country in which they are located.
2. Non-residents of Spain for tax purposes
The Wealth Tax Act provides that if you are not a Spanish tax resident but have assets in Spain of a certain amount (other countries are not counted), you will be subject to wealth tax in Spain.
As mentioned above, the asset tax is only applicable to groups with assets up to a certain standard. Currently, the default starting point for asset tax in Spain is €700,000. This means that the total assets reach €700,000 before the tax is payable.
Note: The local authorities have certain jurisdictions with regard to asset tax, so the starting point may vary from region to region. For example, in Catalonia, the threshold is €500,000.
How do you calculate your assets value?
The Assets Tax Act provides for a range of assets to be excluded from the €700,000 (or €500,000) threshold, such as:
-Property that is included in the list of cultural heritage of Spain or the Autonomous Communities. e.g. Some Picasso paintings, for example, are not taxed, despite their value. All rights reserved.
-The maximum deduction for a family home is 300,000 euros.
Example 1: I am living in Valencia (the starting point for the region is €500,000) and have a family home of €250,000 plus a deposit of €300,000. As the family home does not exceed 300,000 euros, it does not count towards the threshold. 300,000 euros in savings, which also does not reach the threshold of 500,000 euros, is not taxable.
Example 2: I live in Andalusia (where the threshold is €700,000) and have a family home of €400,000 plus a deposit of €350,000. The value of the home is only calculated for the excess of €300,000, i.e. €100,000, plus the deposit of €350,000, making a total of €450,000 and therefore not taxable.
-Property that is put into economic activity or economic production and that economic activity is used as a person’s main income. For example, if I have a shop worth €150,000 which I use to run a shop and the income from this shop is my main income, in this case the shop is not subject to property tax.
Conversely, if I have a shop that I do not use but only use to collect rent, the value of the shop will be included in the taxable base for property tax purposes.
