Personal income tax (Spanish: Impuesto sobre la Renta de las Personas Físicas, IRPF) is not the only tax paid by individuals who are tax residents of Spain. There is another one, the wealth tax in Spain (Spanish: Impuesto sobre el Patrimonio), which is levied on the personal assets of citizens and tax residents if their value exceeds the current thresholds.
Who pays wealth tax in Spain?
Wealth tax in Spain is charged on the net value of the assets owned by an individual: property, rights and financial assets. A system of tax allowances and deductions applies. When the taxable base is calculated, existing personal obligations, charges and debts are taken into account.
Only individuals pay the tax. It is calculated as of 31 December of each tax year. The return is filed electronically.
You are required to file a return if one of the following conditions is met:
- After all allowances and deductions have been applied, there is a positive taxable base;
- The total value of all tangible and intangible assets exceeds €2 million, even if the taxable base is negative after allowances and deductions.
The minimum taxable base is €700,000, so if the net value of the assets does not exceed this threshold, there is no obligation to file a return.
However, Spain’s autonomous communities have the right to set their own allowances and deductions, so many regions have their own thresholds: in the Valencian Community the general minimum taxable base is €600,000, and the special one is €1 million (it applies to people with a degree of disability of 33% or more for mental illness, or 65% or more for physical and sensory conditions).
Under current rules, the taxpayer’s main home is exempt from wealth tax up to €300,000. If the main home is worth €500,000, only €200,000 (500,000 – 300,000) will be included when the taxable base is calculated.
How is wealth tax in Spain calculated?
The amount of wealth tax payable in Spain is calculated as follows:
- The tax-free allowance is deducted from the taxable base (in the Valencian Community, €600,000 or €1 million).
- The result is multiplied by the tax rate.
- The applicable deductions are applied to the resulting amount, which gives the tax payable.
The following types of assets are not taken into account when calculating wealth tax in Spain:
- Private savings or insurance pension plans.
- Household contents (furniture, household appliances, utensils and so on).
- Assets directly used in the taxpayer’s business activity that provides their main income (for example, stakes or shares in the share capital of companies).
- Works of art, antiques and other assets officially recognised as historical heritage.
- Intellectual and industrial property rights not related to business activity.
A tax deduction may be applied to avoid double taxation.
In the third step, when calculating the tax payable, you may deduct the amount of a similar tax charged on assets and rights located outside Spain and paid in another country.
Wealth tax rates in Spain
Here are the wealth tax rates in Spain that apply in the Valencian Community:
Taxable base after the allowance, € | Fixed amount, € | Remaining base, € | Rate, % |
|---|---|---|---|
0.00 | 0.00 | 167,129.45 | 0.25 |
167,129.45 | 417.82 | 167,123.43 | 0.37 |
334,252.88 | 1,036.18 | 334,246.87 | 0.62 |
668,499.75 | 3,108.51 | 668,499.76 | 1.12 |
1,336,999.51 | 10,595.71 | 1,336,999.50 | 1.62 |
2,673,999.01 | 32,255.10 | 2,673,999.02 | 2.12 |
5,347,998.03 | 88,943.88 | 5,347,998.03 | 2.62 |
10,695,996.06 | 229,061.43 | And above | 3.12 |
Wealth tax in Spain is declared at the same time as personal income tax (the return form is 714). There is a combined cap on these taxes: the sum of the gross tax amounts cannot exceed 60% of the personal income tax base. The excess is deducted from the wealth tax payable, but the reduction cannot exceed 80% of that amount.
