Malcolm Roach M.I.C.M

Director (UK)

Wincham Consultants Limited

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By Malcolm Roach M.I.C.M - Tue 18th Oct 2011

 

Tumbit Approved Partner

It has been recently announced that Wealth Tax is to be re-introduced in Spain for a limited period of time. This is a temporary measure and will be reviewed on 1st January 2013. So for tax years 2011 and 2012 (submitted in 2012 and 2013 respectively) you will need to remember to include any Wealth Tax portion in your annual Tax Returns.

It is not all bad news though. With any re-introduction comes changes, and we have attempted to pick out the salient points from the announcement and these are presented below.

The new Wealth Tax will be introduced on a gradual scale from 0.2% to 2.5% with the highest percentage being paid by the owners of the largest assets. Please bear in mind that the responsibility for collecting this tax has been transferred to each individual Autonomous Spanish Community (ASC's or Comunidades Autonomas) who will be free to apply the percentages as they think fit and even to change the percentages if they think it is appropriate.

The tax exempt amount has been increased from 108,182.18 Euros (Eu) to anything over 700,000 Eu. This means that those persons with total net assets over 700,000 Eu will pay this tax. Again, please bear in mind that individual ASC's are free to change the exemption amount should they consider it appropriate. One very important change to note is that the minimum exemption amount of 700,000 Eu will also apply to Non Resident Tax Payers in Spain. There will no longer be any discrimination between Resident and non-Resident tax payers in this respect.

One subtle difference, however, remains. When calculating the Wealth Tax payable for Resident Tax Payers the exemption applies to your worldwide estate and for Non Resident Tax Payers the exemption applies to your assets in Spain.

Residents

There is a further tax exemption for residents of 300,000 Eu allowable on their main home, an example of the tax payable on a 1,300,000 Eu worldwide estate including assets held in the UK and offshore with a main home value of 400,000 Eu is as follows:

Main home 400,000 Eu minus exemption 300,000 Eu = 100,000 Eu to be added to other world-wide assets in this case 900,000 Eu. This would then be less the 700,000 Eu leaving 300,000 Eu taxable at the regional rate. Note: if the main home is valued at less than 300,000 Eu then the unused allowance cannot be used against other wealth assets.

Non-Residents

Non-residents have a maximum tax free allowance on their assets in Spain of 700,000 Euros only. No tax is payable on assets outside of Spain. Regional tax rates will apply on all assets in Spain.

Companies

Companies from the UK, Spain and the rest of the world are not subject to the new Wealth Tax and this includes UK Limited Companies which own property in Spain.

Non- Resident Tax Payers, who are subject to paying the new Wealth Tax, are recommended to submit their annual Tax Return using a Fiscal Representative who acts on their behalf in dealings with the Tax Office. The Fiscal Representative should be appointed in the following situations:

A.) When the Non- Resident Tax Payer is operating from any kind of permanent establishment, eg office or shop.

B.) When the Non- Resident Tax Payer is requested to do so by the Tax Office due to the amount and/or characteristics of the assets.

C.) When a non-resident owns a property in Spain, they must appoint a fiscal representative.

The appointed representative can be an individual or company but must be resident in Spain. Failure to comply will be considered to be a serious tax violation, punishable with a fine of maybe 1000 Euros.

Please feel free to post your comments or questions (below) or contact us by clicking our link (above) to arrange for a personal, no obligation proposal.