BRIEF SUMMARY ON THE RETURN OF SPANISH WEALTH TAX FOR 2011 AND 2012

BRIEF SUMMARY ON THE RETURN OF SPANISH WEALTH TAX FOR 2011 AND 2012

In 2008 the Spanish Government chose to ‘eliminate’ wealth tax by applying a 100% exemption, instead of derogating the law. On 17 September 2011 the wealth tax was reintroduced by the Spanish Government as an ‘emergency economic measure’. The 100% exemption was changed to a tax free allowance of 700.000€ for tax years 2011 and 2012. Therefore, wealth tax is now back, although with the following basic characteristics: Who does the Spanish Wealth tax apply to? Those with net wealth exceeding 700.000 €. It is a tax on individuals – not families or couples. Who is subject to file a Spanish wealth tax declaration? i) Those with net wealth exceeding 700.000 €, or those ii) With gross assets that exceed 2.000.000 €, even if net assets are less than 700.000 €. Net wealth calculation and tax ratesNet wealth is calculated by deducting total liabilities from total assets. Assets are usually valued at cost, but there are some exceptions to this rule. Spanish residents are taxed on worldwide net wealth. Non-residents (typically owners of holiday homes) are taxed only on Spanish net wealth.

Tax rate band €Cumulative wealthTax Rate %Tax on bandCumulative tax
700.000,00700.000,000,2%00,00
167.129,45867.129,450,2%334,26334,26
167.123,431.034.252.880,3%835,631.169,89
334.246,871.368.499,750,5%2.506,863.676,75
668.499,762.036.999,510,9%8.523,3612.200,11
1.336.999,503.373.999,011,3%25.904,3538.104,46
2.673.999,026.047.998,031,7%71.362,33109.466,79
5.347.998,0311.395.996,062,1%183.670,29293.137,08
Thereafter2,5%

Annual income tax on theoretical rental income applicable to second/holiday homes remains unchanged. Spanish residents are also entitled to an exemption of up to 300,000€ on the value of their homes. Additionally, trading assets are usually exempt from this tax. The 100 % exemption is to be reinstated for 2013 and subsequent years. However, this is not completely guaranteed because, as we have seen, Governments can change their plans. If it is actually reinstated no declaration would need to be filed in 2014 for the Wealth Tax. It is important to bear in mind though that this tax is ceded to the autonomous regions of Spain. They have extensive powers to modify the tax regime. Therefore, we will have to see how this tax wealth evolves in the different regions of Spain. This is even more so because the nationwide elections to take place in November are expected to result in a change on national Government from the current socialist PSOE party to the centre-right Partido Popular.

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