Wealth Tax

 

The Socialist PSOE Government abolished wealth tax (impuesto extraordinario sobre el patrimonio) - often referred to as simply 'el Patrimonio' in Spanish - on the 1st of January 2008 in a bid to stimulate the country's ailing economy.

However, on the 16th of September 2011 a bill was put before Parliament to support the re-introduction of the tax, which was eventually agreed to on the 23rd of September - the final session of Parliament before it was dissolved in preparation for Spain's November General Elections.

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Unusually, both the ruling Socialist PSOE party and the Partido Popular opposition worked together in ensuring the bill was passed smoothly and quickly - 176 Voted in favour of the re-introduction to two against and 166 abstentions.

Who Pays Wealth Tax ?

The new wealth tax is levied on all Spanish Residents AND non-Residents who have assets of more than 700'00 euros - over and above their primary place of residence (up to a value of 300'000 Euros - an increase on the original 150,253 Euros). The Government estimates that it will apply to no more than 160'000 residents.

However, Spanish residents are taxed on the assets that they hold throughout the world, whereas Non-Residents are just taxed on the assets that they hold in Spain alone.

Whilst under previous law, the exemptions and deductions did not apply to non-residents, they do now, but Non-residents are deemed to spend the majority of their lives overseas, and therefore there Spanish property is treated as a second home. In short, they can not take advantage of the 300'000 Euros per person main property exemption.

What about couples ?

Couples will be assessed for wealth tax separately, and jointly held assets are treated as belonging to each individual on a 50:50 basis, so the threshold for a married couple is therefore €1.4 million. Therefore if a property is held in joint names the threshold value of the property increases to 600'000 Euros.

When is it paid ?

The Tax has only been agreed to and applied for the years 2011 and 2012 alone, and therefore it has only been re-introduced temporarily. The tax can be paid any time up to 12 months following the end of the previous tax year - IE those who the tax apply to have until 31st December 2012 to pay their taxes for the year 2011.

How is the tax applied ?

The new tax threshold has been raised from 108,182 to 700'000 Euros and taxes will be applied at a rate of between 0.2% and 2.5% of all assets declared.

It is recommended that a financial professional calculates and submits your declaration as they will be able to ensure that you take advantage of the possible exemptions, deductions and allowances*, and this is usually done at the same time as making an income tax declaration**.

*The Regions may make concessions here to make the exemptions more favourable, but not more severe.

**In the case of non-residents, it is mandatory to appoint an accredited professional to do this on your behalf, and failure to do this will result in a fine of 1'000 Euros.

How is the value of the main residence calculated ?

In today's market the actual value of a property can have little real meaning, but it still needs to follow an established formula as far as the tax office is concerned so they know how much to tax your property.

This value is based upon whichever sum is the higher out of : A) The Catastral Value B) The price shown on your purchase agreement C) Any value previously declared for other tax purposes.