Wealth tax. Who has to pay it?
Dear Sir,
As usual, there are many conflicting stories about this tax. A lot of people have told me that there is nothing to worry about, and others tell me that I might have to declare and pay.
Nobody seems to know how much I will have to pay (if anything), so I writing to you for clarification.
ANSWER
The probable reason for the lack of understanding is that this law has been changed over the recent years, and the tax free allowance has also varied.
Its proper Spanish name is 'Impuesto Sobre el Patrimonio' and is a tax on capital assets.
In your email you don´t clarify if you are a resident in Spain for tax purposes or a non-resident.
The tax varies according to the region where you live. Let's say that you own a property in the Valencia region with a value of €650,000 The first €600,000 are tax free, so if you only own this property, you will have to pay 0.2% tax leaving you a bill of €100.
If the property is jointly owned, say with your spouse, you will not have to declare or pay anything because the value of your share in the property is less that the tax free allowance of €600,000.
If you are a resident in Spain, you have to declare your worldwide assets, but your main residence is tax free up to a limit of €300,000. Therefore using the same example as before, with a jointly owned house with a value of €650,000, one half share will be €325,000, you will then be under the tax free allowance.
However, as I have mentioned before, your worldwide assets have to be included, so if you have capital or other properties outside of Spain, you will probably have to pay this tax.
On the national scale, the highest percentage is 2.5%, and this is on a wealth in excess of €10,695,996.06 after the tax free allowance.
The official tax form used for this tax is the 714.
As a non-resident in Spain, you will also have to declare an 'income tax'. This income tax is not based on any real income you may receiving, but it is mysteriously based on the rateable value of your property.
This tax is paid even if you don´t rent your property to a third party. It is not a high tax, and because of this, I would advise it is paid, because if you dont´, the penalties far outweigh not doing so.
The official tax form for this tax is 210.
Most, if not all, non residents appoint a fiscal representative who would deal with these taxes on your behalf. Thus providing you with peace of mind.
We would strongly recommend you appoint a fiscal representative, as it is important to have your tax affairs in order, especially when you decide to sell your property, as usually this is when the tax man has a careful look into your affairs.