Spanish wealth tax returns need to be submitted by the end of June 2016, for assets held at 31st December 2015. If you are unhappy with your wealth tax liability now is the time to seek advice to see how you can reduce your tax bill next year.
There are so many attractions and advantages to living in Spain. However, some expatriates find the tax burden quite high, especially if they are liable to wealth tax on top of income tax.
Wealth tax returns need to be submitted by the end of June 2016, for assets held at 31st December 2015. Married partners need to make separate returns reflecting your share of any joint assets and liabilities in addition to any personal items. If you are unhappy with your wealth tax liability now is the time to seek advice to see what you can do to reduce your tax bill next year.
Wealth tax rules
Wealth tax is an annual tax, payable on the total value of your taxable assets as at 31st December. If you are Spanish resident you are liable to wealth tax on your worldwide assets. Non-residents are only liable to wealth tax on assets located in Spain.
This unpopular tax was effectively abolished in 2008 when the government approved a measure to apply a 100% tax credit against an individual’s wealth tax liability. However, it was reinstated in 2011, supposedly as a temporary austerity measure, but it is still in place for 2016.
In general, each resident individual has a tax free allowance of €700,000 plus a €300,000 allowance on his main home. If a couple owns the property in joint names, each gets the €300,000 allowance.
Non-residents receive the individual allowance of €700,000, but no allowance against their Spanish property.
The progressive state tax rates range from 0.2% for assets up to €167,129, to 2.5% on assets over €10,695,996.
However, the local autonomous communities can amend the allowances and rates.
In Islas Baleares the wealth tax rates range from 0.28% to 3.45%. Last year the individual deduction had been increased to €800,000 but with effect from January 2016 it is back down to €700,000.
In Comunidad Valenciana the wealth tax rates range from 0.25% to 3.12%. The individual allowance was also reduced from €700,000 to €600,000 for the region.
In Murcia the wealth tax rates range from 0.24% to 3%.
In Andalucía the wealth tax rates range from 0.24% to 3.03%.
In Cataluña the wealth tax rates range from 0.21% to 2.75%. Additionally, the individual allowance was also reduced from €700,000 to €500,000 for the region.
Islas Canarias applies the same rates and allowances as the state ones.
The tax is payable on the value of most of your assets, such as real estate, savings and investments, jewelry, art, cars, boats etc.
Property is valued at the highest of the officially registered valor catastral; the value taken into account for any other tax purposes (as given by the tax office), or the price in the purchase agreement (i.e. acquisition price). The current value of the property is disregarded for this purpose.
Some assets are exempt from wealth tax, such as household contents (but excluding jewels, fur coats, vehicles, boats, art and antiques); pension rights (but not purchased annuities); owner managed small businesses and business assets (with conditions). Certain shareholdings are exempt where you carry out managerial duties and derive a salary.
Loans are deductible in calculating your net taxable wealth provided they were not used to buy or invest in assets exempt from Spanish wealth tax.
Limiting wealth tax
While wealth tax is an unpopular tax, there is some good news.
For a start, your cumulative wealth and income taxes cannot exceed 60% of the ‘general and savings taxable income bases’ of residents (but still excluding from savings income any gains on assets held for more than one year, and the associated tax rates). This is subject to paying a minimum of 20% of the full wealth tax calculation.
However, this liability cannot be reduced at all on assets that do not produce an income, such as your home and other property that is not let out, interest free loans, jewellery, antiques etc.
There may be other steps you can take to reduce a wealth tax liability, or eliminate it completely, particular on your investment assets. You need to seek specialist advice on how to re-structure your investments, but you need solutions that are personalised for your situation and objectives.
If wealth tax, or other Spanish taxes, are a concern for you, contact the Spanish tax specialists at Blevins Franks. We would review your current tax planning and the way you own your assets, to see if you can use Spanish compliant arrangements to lower your tax liabilities – we have saved our clients a substantial amount of tax over the years. Blevins Franks has decades of experience advising expatriates in Spain. We have in-depth knowledge of Spanish taxation and specialise in reducing tax on invested capital, pensions, wealth and inheritance.
Any questions? Ask our financial advisers for help.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.