Getting to grips with the Spanish wealth tax

Even for new British arrivals in Spain, death and taxes are the two certainties, but few Britons are aware of the country’s wealth tax.

Spain’s Patrimonio wealth tax often takes newly-arrived expats by surprise, especially if they’ve come from the UK where such a tax is totally unknown. Dependent on their destination country's rules, expats are mostly aware they’re liable for VAT, municipal taxes and rates, capital gains tax, income tax and inheritance tax. Reinstated during the 2008 financial crisis, Spain’s wealth tax can come as a shock.

If you own a property in Spain but you’re non-resident, the tax will only be levied on your holdings within the country but, if you’re in Spain for the long haul as a resident, you’re taxed on your total worldwide assets. To soften the blow, generous allowances can be claimed, usually reducing the amount payable by a considerable sum. Complicating matters still further, this so-called national tax is set and regulated by diverse regional authorities, all of whom determine the details in their own way.

The region you’re living in determines the size and type of tax-free allowances, rebates and deductions as well as the actual tax rate itself, making the local law your benchmark rather than the national law which only concerns non-residents. Also, it’s legally required for non-residents to employ a lawyer or accountant as a fiscal representative.

Assets liable for the wealth tax include property, professional and business activities, savings, investment and insurance policies, intellectual property rights, royalties and luxury items such as cars, yachts, art and valuable jewellery or watches. Exemptions apply for pensions, personally owned and run small businesses, authors’ rights and normal household goods and items, provided they’re linked to the person’s source of income and main activity.

Reintroduced in 2011 as a temporary tax, wealth taxes are still stuck in law and government has annually postponed the implementation of a 100 per cent tax allowance as stated in the wealth tax law’s article 33. Abolition of the wealth tax isn’t on the cards, but reviews in each of Spain’s autonomous regions may produce some relief at some time in the possibly far distant future.