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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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For members

READER QUESTIONS

Do I have to do Spain’s annual tax declaration if I arrived recently?

There’s less than a month left to file Spain’s annual tax return, so where do new arrivals stand regarding this? Are they already tax residents? What if they didn’t work in Spain last year and only arrived in 2024?

Published: 12 June 2024 16:17 CEST
Do I have to do Spain's annual tax declaration if I arrived recently?

The Spanish tax system can seem a little complicated at times. This is especially true if you’ve just arrived in the country and don’t speak the language.

A common question among newcomers to Spain is whether or not you’ll need to do an annual tax declaration if you recently arrived in the country.

The Local has covered the tax declaration, known simply as la renta in Spanish, in considerable detail before. You can find our collection of tax articles here. 

But do you have to do Spain’s annual tax declaration if you arrived recently?

The Local Spain spoke to lawyer Maryem Essadik, CEO of Spain-based Marfour International Law Firm, to find out more. 

Do people who have recently arrived in Spain have to file an income tax return?

“It depends on your status as a tax resident or non-resident in Spain, which will be determined based on the requirements provided for in Article 9 of Law 35/2006, of November 28, on Personal Income Tax (LIRPF). 

“If considered a tax resident, that person will be required to submit a Personal Income Tax return, provided that they obtain the minimum amounts to be required to submit it.”

READ ALSO:

Spanish tax residence begins after 183 days in the country. Are there any circumstances in which a person who has recently arrived in Spain (less than 183 days) has to do it?

“If a person stays less than 183 days in Spain during the fiscal year, they will generally be considered a non-tax resident in Spain, and it must be taken into account that “sporadic absences” abroad could be part of said calculation, in accordance with Article 9 of the LIRPF. 

“Additionally, a person may be considered a tax resident in Spain (even if they do not remain in Spanish territory for more than 183 days during the fiscal year) if their base of activities or centre of economic interests is located in Spain, or when your family are considered tax residents in Spain, unless the opposite is duly proven.

“The person who is considered a non-tax resident will only pay tax in Spain on the Spanish-source income obtained during the corresponding fiscal year. 

“Your obligation to file an income tax return will depend on the type of income obtained and whether the payer has applied and paid the corresponding withholding/payment on account, to the extent that they are required to do so.”

READ ALSO:

Keeping in mind that the 2024 Declaración de la Renta applies to the previous year, would they have to pay taxes in Spain for their 2023 income if for example they arrived in March 2024?

On the basis that in 2023 that person did not reside in Spain, in principle they would be considered a tax non-resident in said country. 

Therefore, as mentioned, they should only be taxed in Spain in 2023 if they obtain any income from a Spanish source.

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