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TAXES

Q&A: How does Spain’s solidarity tax on wealth work?

In an attempt to help people in Spain weather the economic storm of the cost-of-living crisis, Spain's left-wing government created a new solidarity tax on people with large net fortunes.

Published: 14 June 2023 16:55 CEST
Q&A: How does Spain's solidarity tax on wealth work?
Your questions answered on Spain's solidarity wealth tax. Photo: VJ Von Art / Unsplash

Q: What is the solidarity tax on wealth?

A: It’s called the impuesto de solidaridad a las grandes fortunas or solidarity tax on large fortunes and it’s a tax on individuals with a net worth of more than €3 million. It’s not a tax on income, but rather on assets and holdings.

Q: Is this a new tax? When did it come into force?

A: Yes, it’s a new and possibly a temporary tax. It become law when it was published in the Official State Bulletin or BOE on December 28th 2022.  

READ ALSO: How Spain’s new millionaire tax will affect wealthy foreigners

Q: How long will it be in force?

A: In principle, it will be applicable to the tax years 2022 and 2023, although the Spanish government has left open the possibility that, at the end of that period, it may continue. 

Q: Who needs to pay Spain’s solidarity tax?

A: All Spanish tax residents who have a net worth over €3 million must pay it. Be aware, it’s a tax on worldwide assets, not just what you own in Spain. It also applies to non-residents with Spanish assets above €3 million.

Q: When do I need to pay it?

A: The new solidarity tax applies to the tax years 2022 and 2023 and you will need to present the amount of assets you held on December 31st 2022. The tax will be payable between July 1st and 31st, 2023. 

READ ALSO – La Renta: What items can you deduct on your Spanish tax return? 

Q: I already pay wealth tax annually, will I be taxed again on top of this?

A: Although this is not the same as Spain’s annual wealth tax, according to tax professionals, you should not have to pay the tax twice.

If you live in a region where you need to pay wealth tax, it will be deductible from the solidarity tax, but if you live in one of the two regions where you don’t pay wealth tax – Madrid or Andalusia, where it’s been abolished – you won’t be able to deduct any.

Q: Can I get any allowances or exemptions?

A: Yes, if you’re a tax resident in Spain, according to international tax advisor, Blevins Franks, you can reduce your taxable base by €700,000. If you own your main home in Spain you will also be able to deduct up to €300,000 from the net value of it. 

READ ALSO: Nine mistakes to avoid when filing your Spanish tax return

Q: How much will I be taxed?

A: The tax rates are progressive above €3 million. Those with assets worth between €3 and €5 million net will pay 1.7 percent; those with assets worth between €5 million and €10 million will pay 2.1 percent; and those with assets over €10 million will have a tax rate of 3.5 percent.

For example, if an individual who is a resident in Spain has €3.5 million in worldwide assets, then they will likely pay 1.7 percent on the €500,000 which is above the €3 million threshold. If they have €7 million, then they will pay 2.1 percent on the €2 million extra that’s above the €5 million threshold.

Spain is one of only a few countries in the world that has a wealth tax for both residents and non-residents, with the threshold set at €700,000 and the tax rising progressively from 0.2 percent to 3.5 percent. 

We at The Local Spain are not tax professionals. What we know, we have learned the hard way by researching and reading, but if you have any doubts about your particular situation, it’s always best to talk to a lawyer. 

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WORKING IN SPAIN

What’s the law on having two jobs in Spain?

With the current cost of living crisis, working more than one job is becoming more and more common, but what are the rules on working multiple contracted jobs in Spain and the tax implications of this?

Published: 25 June 2024 13:24 CEST
What's the law on having two jobs in Spain?

Often it’s necessary to have more than one job at a time, particularly if they don’t pay well and you’re struggling to make ends meet.

In fact, historically that is part of the reason why establishments stay open so late and why siestas were so common – because people would have one job in the morning and then go home for a rest before starting their second.

This is still commonplace today and is in fact becoming more and more popular, with the rise in the cost of living, driving an increasing number of people to take up a second job.

Whatever your reasons for having two jobs or more – to save up more money or gain extra experience and work your way up, there are some financial implications you should be aware of.

What does the law say?

Currently in Spain, there is no restriction that prevents a person from having a second job, with two contracts in two different companies, for 80 hours a week.

According to data from the first quarter of this year from the Active Population Survey (EPA) prepared by the National Institute of Statistics (INE), the number of people with a second job in Spain stands at 591,300, although according to affiliation data of Social Security, some 800,000 people have more than one position.

This trend has been seen in each quarter of the EPA since 2022 and, right now, is close to a historic number.

Categories you should be aware of

There are two types of categories when you work in multiple jobs in Spain – these are pluriempleo and pluriactividad. Pluriempleo literally means multiple employment. This is understood as a person who works as an employee in two or more companies under the same Social Security regime.

In this way, it differs from pluriactividad or multiple activities, which is when people work for others and have their own business at the same time or their second job is under a different social security regime.

For example, if you work as a hotel receptionist in the morning and then in a restaurant at night, these positions are considered to be part of the same regime, but if you work in a hotel in the morning and then as a nurse in a hospital at night, these are two different careers and therefore social security regimes.

If you’re self-employed as well as having a contract job, this is a slightly different situation. To find out more, read our guide below. 

READ ALSO – Self-employed in Spain: What are the tax rules if you do two or more jobs?

What are the tax and social security implications?

If you have two separate jobs, you are required by law to report your situation to Social Security, and to each of the companies you’re employed by.

When it comes to the Tax Agency, it’s important to note that you are obliged to submit your yearly Income Tax return (Renta), when you are paid by more than one employer and your income exceeds €22,000 per year.

READ ALSO – EXPLAINED: The key changes to Spain’s 2023/2024 annual tax return

In 2024, the maximum social security contribution base for employees has been set at €4,720.50 per month. This means, that regardless of whether your income from two positions exceeds this amount, the social security base will not be more than this.

The amount of IRPF (Personal Income Tax) must also be taken into account. If you are combining two contracts, it’s important to calculate the withholding tax.

This is because companies calculate personal income tax based on your annual compensation expectations. They do not take into account the existence of another job, so they apply the discount depending on what they are paying you only.

This means that they will keep less than what they should and when you’re filling out your Renta yearly income tax return, you will most likely have to pay the extra to make up the difference. 

In this case, you should request that both companies calculate personal income tax according to your earnings, so that you can get a good idea of the amount you have to pay working two positions.

You may also consider hiring a gestor or accountant to file your yearly tax return for you if you have a particularly complicated situation and work three or more jobs for example. 

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