Wealth tax
Wealth tax (also known as property tax or tax on the rich), as the name implies, is a tax that one has to pay when one’s assets reach a certain amount.
When do I have to file an asset tax return in Spain?
There are two situations in which you need to file an asset tax return in Spain:
- Tax resident in Spain.
A person is a tax resident if he or she resides in Spain for more than 183 days per year. The Wealth Tax Act provides that if a Spanish tax resident has a certain amount of assets worldwide, he or she will have to pay assets tax in Spain.
In other words, if you are a Spanish tax resident, it depends on your global assets, regardless of the country in which they are located, whether or not you have to pay tax on them in Spain.
Related article: Criteria for individuals to be considered tax residents
2. Non-residents of Spain
The Wealth Tax Act provides that if you are not a Spanish tax resident, but have assets in Spain up to a certain amount (other countries are not counted), you are also subject to asset tax in Spain.
As mentioned above, the wealth tax is only for those groups whose assets reach a certain standard. Currently, the default tax break (exemption) in Spain is 700,000 euros. That is, the total assets reach 700,000 Euros before they are subject to tax.
Note: The regional authorities have certain jurisdictions regarding asset tax, so the starting point may vary from region to region. For example, in Catalonia and Valencia, the tax break is 500, 000 euros.
Tax exclusion
The Wealth Tax Act provides for a range of assets to be excluded from the taxable base:
-Property that is included in the list of cultural heritage of Spain or the Autonomous Communities. For example, some Picasso paintings, despite their value, are not taxed.
-For habitual residence house, the maximum amount of deduction is 300,000 euros.
Example 1: I live in Valencia (where the tax break is €500,000) and have a family home of €250,000 plus a deposit of €300,000. Since the family home does not exceed 300,000 euros, it is not taxable. As to 300,000 euros in savings, which also does not reach the threshold of 500,000 euros, is not taxable either.
Example 2: I live in Andalusia (where the tax break is 700,000 euros) and have a family home of 400,000 euros plus a deposit of 350,000 euros. 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 invested in economic activity or economic production and that economic activity is used as a person’s main income. For example, if I have a business premise worth €150,000 which I use to run a store and the income from this business is my main income, in this case, this store is not subject to property tax.
On the contrary, if I have a business premise that I do not use, but only use to collect rent, in this case the value of the store will be calculated in the taxable base of the property tax.
Related article:
Obligation to file tax return
You have to file a Wealth Tax return if you are in any of these cases:
Your tax liability, determined in accordance with the regulatory rules of this tax, and after applying the applicable deductions or allowances, is positive.
When, not being given the previous circumstance (even you do not need to pay tax), the value of your assets or rights is greater than 2,000,000 euros.
