The regional government has decided to apply a 100% exemption to wealth tax (impuesto sobre el patrimonio in Spanish), which, in practice, removes obligations for all taxpayers. As a result, from the 2023 tax year, wealth tax will no longer be collected in Andalucia.
The measure aims to remove fiscal pressure on wealthy individuals and encourage them to become residents in Andalucia. The regional government estimates that it will attract 7,000 new residents next year.
What’s The Saving On Wealth Tax In Andalucia As A Result Of The Measure?
Currently (including the 2022 tax year), wealth tax is charged on a sliding scale of 0.2% to 2.5% on the value of assets, worldwide or in Spain depending on your residence status. However, there are exemptions as follows:
- Up to €700,000 allowance on personal assets excluding your main residence.
- Up to €300,000 allowance on the fiscal value of your main residence.
In practice, these allowances mean that most people are exempt from paying wealth tax. As a result, around only 16,700 people paid the tax in Andalucia in 2020 (latest data available).
What About The Rest Of Spain?
The abolition of wealth tax in Andalucia is something of an exception in Spain. In fact, it is only the second region in the country to do so. Andalucia, therefore, joins Madrid.
What is the Spanish wealth tax?
The Wealth Tax in Spain is an annual tax, payable on the total net value of your assets held on 31st December. The total net value is understood as: All assets and rights of economic content owned by a natural person deducting charges and encumbrances which diminish its value, as well as personal debts and obligations.
Who pays Wealth Tax?
Wealth tax may catch you by surprise, as Spain is one of the few countries in which this extra tax is approved. Both residents and non-residents are subject to paying Spanish wealth tax. This tax does come with a series of allowances, which means that many people are exempt from this tax, however, for wealthier individuals, it can have a significant impact.
The rules vary depending on your residency status in Spain and the region you are in, as several Spanish autonomous regions, have their own tax laws in force, which allow them to set their own tax-free allowances and deductions or establish the levied tax rate they see fit.
For residents
- Pay tax on worldwide assets.
- Have ample tax allowances.
- Are entitled to a deduction of 300,000 € per owner on your main home.
- Are required to submit the wealth tax declaration:
- If after applying these allowances, the net result is positive.
- If the total gross value of your goods exceeds 2 million euros.
For non-residents
- Pay tax on Spanish assets only.
- From this year, with the introduction of the Law 11/2021, it includes the possibility of applying regional wealth tax regulations to non-residents in third countries (outside the European Union or the European Economic Area). It shall be the autonomous region in which your assets with greatest value are located.
- Otherwise, you are entitled to a 700,000 € deduction per person.
- Are required to submit a wealth tax declaration:
- If after applying these allowances, the net result is positive.
- If the total gross value of goods in Spain exceeds 2 million euros.
Taxable persons not resident in Spanish territory, when they operate through a permanent establishment or when the tax authorities requires it due to the amount and characteristics of the taxpayer’s assets located in Spain, have the obligation to appoint a representative before the tax authorities in relation to their obligations for this tax.
Main assets levied by the Wealth Tax
- Real estate
- Bank deposits and investments
- Assets and rights owned by individuals related to professional or business activities
- Luxury assets such as jewellery, fur coats, boats, fast cars and other vehicles
- Art objects and antiques
- Life insurance, life annuities and temporary annuities
- Royal rights, administrative concessions and intellectual property rights
Spanish Wealth Tax exemptions
- Household contents (excluding those above)
- Works of art and antiques
- Economic rights in some instruments such as pension rights
- Business assets when they derive from a professional activity that must constitute your main source of income and must be carried out your own account and on a habitual basis.
- Intellectual property rights in the author’s ownership
- Shares in entities, listed or unlisted, with the following requirements:
- You own at least 5% of the share capital (or at least 20% including shareholdings belonging to a spouse or other family members)
- You carry out managerial duties for the company, perceiving a salary for such activities which is at least 50% of your total net earnings.
- Can´t have as its principal activity the management of movable or immovable property.
What are the buying costs in Spain?
Find out everything you need to know about the process in Spain, what documents you need and full information about yearly taxes and community fees here.
- Subscribe to our YouTube Channel for weekly videos of exciting new property offers
- Check our News Section for property market updates on Costa del Sol, Spain
- Browse through more properties on our web site here
Source: https://costaluzlawyers.es/blog/end-of-wealth-tax-in-andalucia-from-2023/
