Wealth tax in Spain: Rates, allowances and recommendations

Last updated on April 30th, 2020 at 05:09 pm.

The wealth tax in Spain, or patrimonio, is something that many people are caught out by as it has no equivalent in several other European countries.

In this article we will go through some relevant information regarding the wealth tax in Spain. However, we would like to remind you that taxation in Spain can be complicated and you could be subject to fines or penalties if you miss a deadline or don’t do your taxes properly. Advisably, you should seek fiscal advice from an expert to avoid possible complications.

What is the wealth tax in Spain?

As we said, the wealth tax in Spain has no equivalent in other countries. Although there was a 100% discount in 2009, now, if you have worldwide assets of over €700,000, you are liable for wealth tax of between 0.2%–2.5% on a sliding scale.

At the time of writing, the national wealth tax starts at 0.2% for the first €167,129 over the €700,000 allowance, increasing gradually to 2.5% on anything over €10,695,966. However, it is important to be aware that there are variations across regions.

How is your wealth tax liability calculated?

When calculating your wealth tax liability, the following things are included in your estate:

• Property (valued at whichever is the highest of the catastral value, the purchase price, or the assessed value by the Tax Authority).  
• Business assets and professional activities.
• Bank balances.
• Insurance payouts and temporary income sources.
• Luxury assets including jewellery, fur, vehicles, art and antiques.
• Royalties, administrative concessions and intellectual property rights.

However, residents in Spain enjoy generous deductions, including an extra €300,000 allowance for homeowners. Married couples are also entitled to claim deductions as individuals, creating a combined tax-free allowance of €1,400,000 on their estate, plus an extra €600,000 on their main residence.

What is exempt from Wealth tax?

Furthermore, the following items are exempt from wealth tax in Spain:

• Household contents (excluding luxury items specified above).
• Owner-managed small businesses.
• Business assets and shareholdings of over 5%, so long the business is the taxpayer’s main source of income (over 50%) and operations are consistently managed by the taxpayer.
• Pension rights.
• Intellectual property rights in the author’s ownership.

You can also offset mortgage debt against wealth tax, however, you can’t claim for debts that are covered by other exemptions. For instance, you can’t offset mortgage debt from your principal home as it’s already covered by the main home exemption. 

Recommendations

Wealth tax in Spain is complex and the information given here is intended as a general picture of what to expect. Exactly what you’re entitled to will depend on your region and specific personal circumstances. We would strongly advise that high-net worth individuals consult with a tax expert for a complete overview of your wealth tax obligations.

At Ábaco Advisers, our team of experienced fiscal and taxation advisers can help you make sure your wealth tax and the rest of your Spanish obligations are in orders. For more information, without obligation, you can fill out this form and we will get in touch with you as soon as possible.