The Spanish Wealth Tax (Impuesto sobre el Patrimonio)

Understanding the Spanish Wealth Tax (Impuesto sobre el Patrimonio) is crucial for foreign retirees.

Management: Autonomous Communities (Comunidades Autónomas)

The Wealth Tax is a state tax, but 100% of the revenue is transferred to the Autonomous Communities (Spain’s regional governments).

• Regional Power: The Autonomous Communities have the power to set their own rules for the minimum exemption, the tax rates, and bonuses/deductions.
• State Rules as Default: If a Community does not establish its own rules, the general rules set by the State will apply.

🙋 Do I Have to File? The Minimum Exemption

You must file a tax return if your gross assets (your total assets before deducting debts) are valued at more than the minimum tax-exempt amount (mínimo exento).

• General State Minimum: If your Autonomous Community hasn’t set its own rule, the minimum exemption is €700,000.
• Taxable Wealth: The tax is only applied to the amount of your net worth (assets minus debts and the minimum exemption) that exceeds this minimum.
• Exemptions: Note that the Primary Residence is exempt up to a maximum of €300,000 (this is in addition to the minimum exempt amount).

🏡 Mínimo Exento in Autonomous Communities

The table below shows the minimum tax-exempt amounts set by the Communities you mentioned, plus others.

🗓️ When is the Tax Calculated?

The tax is calculated on your wealth as it exists on December 31st of each year.

• This means there is no true tax period. If a person passes away on any day other than December 31st, the tax is not due for that year.

👤 Who Must Pay?

The tax applies based on whether you are a resident or a non-resident for tax purposes in Spain.

1. Tax Obligation for Residents (Obligación Personal)

If you are a tax resident in Spain, you must declare your total worldwide assets (all your assets and rights, no matter where they are located in the world) as of December 31st.

2. Tax Obligation for Non-Residents (Obligación Real)

If you are not a tax resident in Spain, you only have to declare the assets and rights located, exercisable, or required to be fulfilled in Spanish territory. This includes:

• Property located in Spain.
• Assets linked to a business or professional activity carried out in Spain.

💰 How Assets Are Valued (Valoración de Bienes)

The value of your assets is determined according to specific rules to calculate your Gross Wealth.

📉 Deductible Debts

You can deduct debts and personal obligations that you are liable for, as well as real charges and encumbrances (like mortgages) that reduce the value of specific assets.

📊 Tax Rates (Cuota a Pagar)

The tax is applied to the Net Taxable Base (Gross Assets – Debts – Minimum Exemption) using a progressive scale (the tax rate increases as your wealth increases).

💸 Tax Scales: State, Andalusia, and Valencia (2024 Example)

The following table shows the progressive tax scales. The tax due on each bracket of wealth is calculated using the applicable rate.

Note: Some Autonomous Communities, like Andalusia, have introduced a 100% bonus on the tax quota, effectively resulting in no wealth tax being paid by residents in those regions.

💡 Example: Calculating the Tax Due

The following example illustrates how the tax is calculated, especially when you have assets that are exempt from the tax (like your main home up to €300,000) but are still used to determine the rate you pay on the rest of your taxable wealth (progressivity).

Example: Calculation of the Total Tax Due (Cuota Íntegra)

Step 1: Determine the Base for Rate Calculation

This is the sum of the Net Taxable Base and the Exempt Assets used for progressivity.

• A + B = 356,900 + 68,000 = 424,900

Step 2: Apply the Tax Scale to the Rate Calculation Base

Using the State scale (as an example for Galicia):

• Tax on first €334,252.88: €835.63
• Remaining base (€424,900 – €334,252.88 = €90,647.12) is taxed at 0.50%: €453.24
• Total Tax Resulting: €835.63 + €453.24 = €1,288.87

Step 3: Calculate the Average Tax Rate (TMG)

The resulting tax is divided by the Rate Calculation Base to find the rate.

• TMG = Total Tax Resulting / Rate Calculation Base * 100 = (1,288.87 / 424,900} * 100 = 0.3033

Step 4: Calculate the Total Tax Due (Cuota Íntegra)

This final average rate is applied only to the Net Taxable Base.

• Cuota Íntegra = Net Taxable Base * TMG = 356,900 * 0.3033 % = €1,082.26

Non-Residents: Subject to Real Obligation 🌎➡️🇪🇸

Non-resident individuals in Spain may be liable for Wealth Tax on assets or rights located or exercisable in Spanish territory.

• Former Tax Residents (EU, Norway, Iceland): Tax residents who move to another country can opt to continue being taxed by Personal Obligation (on worldwide wealth). This option is exercised by filing Form 714 in the first year they become a non-resident.
• Beckham Law Taxpayers (Article 93 IRPF Law): Taxpayers under this special regime are subject to Wealth Tax by Real Obligation and can also choose to apply the regional regulations of an Autonomous Community.

Double Taxation Agreements (DTA) and the OECD Model 📜

The rules for taxing assets vary depending on the country’s Double Taxation Agreement (DTA) with Spain, which often follows the OECD Model DTA (Article 22):

1. Immovable Property (Real Estate): Assets consisting of immovable property situated in the other Contracting State may be taxed in that other State (Spain can tax Spanish real estate).
2. Business Assets: Movable property forming part of the assets of a permanent establishment may be taxed in that other State.
3. Ships/Aircraft: Assets consisting of ships or aircraft operated in international traffic may be taxed only in the Contracting State where the place of effective management is situated.
4. All Other Assets: All other assets of a resident of a Contracting State may be taxed only in that State (the country of residence).

Spain’s Reservation: Spain reserves the right to tax assets consisting of:

• Shares or other rights in a company whose assets consist mainly of real estate located in Spain.
• Shares or other participations that confer a right of enjoyment of real estate located in Spain.
• Shares or other rights that constitute a substantive participation in a company resident in Spain.

In practice: Since assets used for economic activities are exempt from WT, and provided the taxpayer resides in a country with a DTA that includes asset clauses, often only real estate located in Spanish territory is taxed.

💡 Note: This article refers exclusively to Wealth Tax, not Inheritance and Gift Tax or Property Transfer Tax.

Debt Deduction 📉

• General Rule: There is no single rule determining whether debts can be deducted or not; each country has its own legislation.
• Spanish Practice: Debts or capital derived from debt must be closely related to the acquisition of the home and formalized at the same time (when the public deed is formalized).

Management and Inspection 💼

The management, inspection, and collection of Form 714 for the Wealth Tax, when filed under Real Obligation, are the responsibility of the State Tax Agency (AEAT).