In Spain, you may be subject to a wealth tax based on your total assets, called the Impuesto sobre el Patrimonio. As of January 2021, the rules have changed.
Each Spanish Autonomous Region handles the charging of this tax. Each region can apply their own rules, so the Wealth Tax owed depends on where you are resident. For example, residents of Madrid don't have to pay the wealth tax at all.
You are taxed only on your assets over 700,000€. If you’re married, then you and your wife will both benefit from this allowance so you will be able to claim a €1,400,000 allowance against your joint assets.
You have an exemption of 300,000€ against the value of your primary home (excluding properties owned through corporate structures). If you are non-resident in Spain, then the property in Spain is not your primary home. If you are married then each can deduct the 300,000€. The property value is reduced by the mortgage amount.
“Assets” include property, cars, boats, investments, expensive jewelry and artwork. Other assets such as household items are excluded.
The wealth tax is an annual tax on the total value of your taxable assets as of 31 December. If you are required to pay wealth tax, you must submit the wealth tax form after the end of the tax year and pay it between May and June.
If the value of all your assets are over 2,000,000€, it is mandatory to file the Wealth Tax form even if you don't owe any wealth tax.
Does the wealth tax apply to worldwide assets?
This is a complicated matter, and each region of Spain has specific rules. As a general rule: if the assets are in a foreign country and the taxes are paid for those assets in that country, there is no need to pay again in Spain, but they need to be declared in Spain. There are exceptions: if the assets are located in a tax haven, then these assets will be taxable in Spain. Spain has treaties to avoid double taxation with most countries.
The default rate goes from 0.2% to 2.5%. The higher the total assets, the greater the percentage. The top rate applies starting around 10 million euros.
The rate depends on where you are a resident. Each Autonomous Region can apply their own rate. If you declare as non-resident in Spain, then the default rate applies.
The total amount of the wealth tax plus the income tax to be paid for that year may not exceed 60% of the income tax base. If the sum of these two amounts exceeds this limit, the amount of the wealth tax gets reduced so as not to exceed this limit.
Specific rules for the Autonomous Regions of Spain
Madrid: 100% exempt from the Wealth Tax, except for taxpayers who have assets over 2,000,000€.
Some regions set an exemption amount for the primary home different from 300,000€:
Some regions declare assets related to the professional activity of the taxpayer as exempt (such as delivery vans). Other rules apply in various Autonomous Regions, so if your wealth tax payment is large, you should get professional help.
Bob and Judy are married and live in their house in Málaga, Spain, valued (as of December 31st) at 500,000€. They also have a Spanish bank account with 1,500,000€. They have a car worth 60,000€. They get an exemption on their primary home of 300,000€ each, so there is no wealth tax for the house. The total for the wealth tax is 1,560,000€, or 780,000€ each. Subtracting the allowance of 700,000€, each pays tax on 80,000€. With a tax rate of 0,2%, each will pay 160€.
Stan and Olivia are married and live in their house in Alicante, Spain, valued at 2,100,000€, including a mortgage of 1,200,000€. The net is 900,000€, or 450,000€ for each. It is their primary home. Since 450,000€ is under the 700,000€ cap, they don't have to pay wealth tax, but since the total asset value is over 2,000,000€, they still have to file the wealth tax form.
Hans and Hella live in Germany. They own a house in Spain valued at 1,000,000€. Since they don't live in Spain, they cannot deduct the 300,000€ for primary residence. Each can apply the 700,000€ exemption, so their wealth tax in Spain is 0€.
The value of the properties you own will be the highest of: