Spain is bringing back the wealth tax

And that MIGHT hit non resident Spanish taxpayers the hardest

The Spanish government is dusting off the wealth tax

Spain has reintroduced the wealth tax which was abolished in 2008, in order to further reduce its budget deficit.  This annual tax, levied on assets like cash, property and investments rather than income, used to bring in over €1 billion a year and was paid mainly by the very well-off because deductions and allowances were enough for ordinary taxpayers to escape with paying nothing.

It has returned relating to assets held at the end of 2011.

The old wealth tax, (Patrimonio in Spanish), was calculated by totalling the taxpayers assets, deducting allowances and applying a % tax rate to the total.  The allowance was €108,182 per person and a married couple claimed two allowances.  In addition the first €150,253 of the value of the main residential property was exempt (€300,506 in the case of a married couple who owned their principal residence jointly).  As you can see, not many people would have to pay this tax but if they did the rates rose as the total assets did:

 

Up to €167,129

0.20%

€167,129 - €334,247

0.30%

€334,247 - €668,500

0.50%

€668,500 - €1,337,000

0.90%

€1,337,000 - €2,673,999

1.30%

€2,673,999 - €5,347,998

1.70%

€5,247,998 - €10,695,996

2.10%

Above €10,695,996

2.5%

 

Note that the rates were appled in bands, so that anyone with assets (after allowances) over €167,129 would pay 0.2% on the first €167,129 and 0.3% on the excess up to €334,247 and so on. There was also some variation in the allowances depending on which autonomous community you lived in as the tax was collected by the communities rather than central government.

Wealth tax for non-resident property owners

Foreign holiday home owners (should) pay non-resident income tax on their property in Spain. This is declared on the Spanish Tax Form 210. Up until 2008 non-residents also had to pay wealth tax (declared using modelo 214) in addition to income tax, which could double or treble their liability to Spanish tax.  The main problem was that non-residents didn't receive any allowances to reduce their liability so they had to pay tax from the first euro of assets they owned. They got neither the individual allowance nor the principal residence deduction on property, and so a €450,000 villa would have cost €1,414 annually in addition to the Form 210 income tax.

Is wealth tax the same this time?

The wealth tax is not as punitive this time around. There is a threshold of 700,000€, so it is payable only by those with assets above this. In addition, there is a 300,000€ allowance against your home for residents.

Non-residents get the same annual allowance as residents, because the EU would find it discriminatory otherwise (they have already made Spain treat non-residents more fairly on non-resident income tax on rental income and capital gains tax). However, they do not get the principal home relief because by definition their holiday home is not their main residence.

More information and current wealth tax rates can be found here.