Wealth Tax

Individuals resident in Spain, with respect to their worldwide assets, as well as non-residents with assets located or rights exercisable in Spanish territory may be obliged to file a Wealth Tax return and pay the corresponding tax. The official tax return form is 714. The deadline for filing is 30 June of the year following the year to which the form refers.

Content overview

• What is Wealth Tax levied on and when is it due?
• Who is subject to Wealth Tax?
• Who is obliged to file Wealth Tax returns?
• Which assets must be declared and at what valuation?
• What assets are exempt?
• Can charges and debts be deducted?
• What is the tax rate?

What is Wealth Tax levied on and when is it due?

Wealth Tax is levied on the net wealth of individuals, i.e. the set of assets and rights of economic content owned, with the exemptions regulated by the Tax Law.

It is due on 31 December of each year and refers to the assets owned by the taxpayer on that date.

Who is subject to Wealth Tax?

You can be subject to Wealth Tax by personal or real obligation.

• Individuals with tax residence in Spain are subject to personal liability. They must declare all the assets and rights of economic content that they own on 31 December, regardless of where the assets are located or where the rights can be exercised.
• On the other hand, those who do not have their tax residence in Spain and are holders of assets or rights that are located, can be exercised or must be fulfilled in Spanish territory are subject to real obligation.

Who is obliged to file Wealth Tax returns?

The following are obliged to file a Wealth Tax return:

a) Those taxpayers whose tax liability, determined in accordance with the rules governing the tax, is payable. If the taxable base, determined in accordance with the tax regulations, is equal to or less than the exempt minimum (in general, 700,000 euros, in some Autonomous Communities it is less, e.g. 500,000 euros in the Valencian Community), there is no obligation to file a tax return.

b) When, in the absence of the above circumstances, the value of the assets or rights, determined in accordance with the tax regulations, is greater than 2,000,000 euros.

Which assets must be declared and at what valuation?

For the purposes of this tax, the following valuation rules must be taken into account:

• Deposits in bank accounts are valued at the higher of the following values: a) the balance at 31.12, b) the average balance in the fourth quarter.
• Listed securities representing the transfer to third parties of own capital (bonds) and equity participation (shares) are valued at their average quoted value in the fourth quarter.
• Units in collective investment undertakings (mutual funds) are valued at their net asset value at 31 December.
• Other securities representing holdings in the equity of any type of entity (shares and unlisted shares) are valued at the theoretical value resulting from the last approved balance sheet, provided that this has been audited, or otherwise at the higher of: the nominal value, the theoretical value resulting from the last approved balance sheet or the value resulting from multiplying by 5 the average profits of the three financial years closed prior to the date on which the tax accrues (which is 31.12.).
• Properties are valued at the higher of the following values: a) the acquisition value, b) the cadastral value - only applicable in the case of properties located in Spain - or c) the value ascertained by the Administration - only applicable in the case of properties located in Spain. However, if the real estate belongs to a company, the above-mentioned valuation rule has to be applied.
• Life insurance and temporary or life annuities will be computed at their surrender value on 31 December.
• Other assets, such as jewellery, vehicles, objets d'art, etc., are valued at their market value on 31 December. In the case of used vehicles, there are valuation tables approved by the Ministry of Finance and the Civil Service.

What assets are exempt?

There are some general exemptions, such as those relating to Spanish Historical Heritage assets and pension plans. We highlight the following exemptions:

1. Exemption for the taxpayer's main residence
   The taxpayer's main residence is exempt, up to a maximum amount of 300,000 euros.
    
2. Shares in certain entities
   For the exemption to apply, the following requirements and conditions must be met:
   a. That the entity, whether it is a company or not, carries out an economic activity and does not have as its main activity the management of movable or real estate assets.
   b. The taxpayer's shareholding in the capital of the entity must be at least 5%, calculated individually, or 20% jointly with his spouse, ascendants, descendants or collateral relatives to the second degree, whether the kinship is by blood, affinity or adoption.
   c. That the taxpayer effectively exercises management functions in the entity.
   d. That, for the management functions exercised in the entity, the taxpayer receives remuneration representing more than 50% of the total net income from work and economic activities.

Can charges and debts be deducted?

Yes, the tax is levied on net assets, with the deduction of charges and encumbrances that reduce their value, as well as debts and personal obligations for which the holder is liable.

However, for those subject to real obligation, applying the same territoriality criterion to debts and expenses, only debts that are located or can be fulfilled in Spanish territory are deductible when determining the taxable base.

What is the tax rate?

The scale of taxation is progressive. The national scale ranges from 0.2% for assets exceeding the minimum exemptions by up to 167,129.45 € and up to 3.5% for the last bracket for assets exceeding the minimum exemptions by 10,695,996.06 € or more. The regional rules need to be considered.

At Lozano Schindhelm we review whether you are obliged to file a wealth tax return and, if so, we take care of its preparation and filing. We also advise you prior to the acquisition of assets in Spain, recommending alternatives that entail a lower tax burden. And if necessary, we assist you in the regularisation of previous years. All this in your language, with high quality standards and backed by more than 15 years of experience in providing tax advice to residents and non-residents, Spanish nationals and foreigners.