As part of the regional budget for 2024, the general wealth tax deduction has increased from the standard €700,000 to €3,000,000. This applies from the 2024 wealth tax returns, which are submitted in 2025.
Wealth tax rules
In Spain, wealth tax is calculated based on the value of your assets as at 31 December each year. If you are resident here it applies to your worldwide assets. For non-residents it affects Spanish assets only.
The tax is payable on the net value of most of your capital assets, such as real estate, savings and investments, shareholdings, jewellery, art, antiques, cars, boats, etc.
Each individual receives a personal tax-free allowance of €700,000 under state rules. Importantly, autonomous regions can vary wealth tax rates and allowances, which is how the Balearics has increased it to €3 million. Spanish residents can get an additional allowance of up to €300,000 against their main home (excluding properties owned through corporate structures). Couples owning assets in joint names can effectively double the allowances (though submit separate returns).
Individuals with wealth exceeding the allowances will pay tax at 2.35% for the excess up to €5,454,958, then 2.9%, then 3.45% for anything above € 10,909,915.
A second wealth tax, Spain’s ‘solidarity tax on large fortunes’ was introduced in 2022 as a temporary levy. The rules, rates and allowances are the same as the standard wealth tax but it only applies on wealth above €3 million and you then get the two deductions mentioned above. This is applied at state level and the autonomous governments cannot change it.
If you pay Spain’s regular wealth tax, you deduct the amount paid from your solidarity tax liability, so you do not pay tax twice.
Tax planning
This Balearics tax reform is certainly welcome news, offering substantial tax savings. But it emphasises the need for specialist advice from experienced advisers, to not only take advantage of these changes but also other aspects of the regional Spanish tax system.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.
Keep up to date on the financial issues that may affect you on the Blevins Franks news page at www.blevinsfranks.com
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