☏ +34 93 665 85 96  |  ✑ info@spectrum-ifa.com

Wealth Tax in Spain

By John Hayward - Topics: Spain, Tax in Spain, Wealth Tax
This article is published on: 10th May 2021

The UK tends to rely on income and inheritance taxes to generate revenue, but countries such as Spain and France, also apply wealth tax (Impuesto sobre el patrimonio). This is an asset tax and can be on cash, real estate, pension funds, shares, investment bonds, ISAs, and even cars. Portugal also has a wealth tax but this relates solely to immoveable property.

Spain eliminated wealth tax in 2008 but then “temporarily” reintroduced it in 2011 and it has been here ever since.

Each autonomous region sets their own allowances and rates after initial direction by central government. The Spanish State’s allowance is €700,000 plus up to €300,000 for one’s main residence. This is per taxpayer. It is important to note here that a property only becomes a main residence after 3 years of continuous habitation. There are a number of exceptions to this rule.

The State’s rates of wealth tax are as follows:

Lower Band Limit (€) Upper Band Limit (€) Tax rate (%)
Nil 167,129 0.2
167,129 334,253 0.3
334,253 668,500 0.5
668,500 1,337,000 0.9
1,337,000 2,673,999 1.3
2,673,999 5,347,998 1.7
5,347,998 10,695,996 2.1
Over 10,695,996 2.5

Wealth tax in Valencia has changed over the years. In 2019, it was announced that the tax-free allowance was being reduced to €600,000. With effect from 2021, the allowance is being reduced further to €500,000. This means that more and more people will become subject to wealth tax.

In addition to the reduction in allowances for 2021, Valencia has higher wealth tax rates than the State’s own rate, as follows:

Lower Band Limit (€) Upper Band Limit (€) Tax rate (%)
Nil 167,129 0.25
167,129 334,253 0.37
334,253 668,500 0.62
668,500 1,337,000 1.12
1,337,000 2,673,999 1.62
2,673,999 5,347,998 2.12
5,347,998 10,695,996 2.62
Over 10,695,996 3.50
spanish tax

Example:
If a couple have assets totalling €2.5 million, including a main residence worth €600,000, the individual annual wealth tax bill based on the State allowance and rates could be around €600. Using the Valencia allowance and rates, the tax bill could be almost €1,800. To clarify, this is per person and payable each year.

Depending on one’s income, and if one is a resident in Spain, the amount due can be reduced. The wealth tax due cannot exceed 60% of one’s taxable base (e.g., annual pension income, savings, etc.) when adding the wealth tax to personal income tax liabilities with a minimum payment of 20% of the wealth tax due. It is important to make certain that all of one’s assets are eligible for this rule.

Article by John Hayward

If you are based in the Costa Blanca area you can contact John at: john.hayward@spectrum-ifa.com for more information. If you are based in another area within Europe, please complete the form below and we will put a local adviser in touch with you.

Contact John Hayward direct about: "Wealth Tax in Spain"

    The Spectrum IFA Group is committed to building long term client relationships. This form collects your name and contact details so we can contact you about this specific enquiry. For further information, please see our Privacy Policy.
     

    If you are in the Costa Blanca area

    Click here to contact
    John Hayward
    If you are based elsewhere

    Click here to contact
    The Spectrum IFA Group