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The Return of Wealth Tax in Spain

Over the period of 1995 to 2007, the average price of property in Spain increased a massive 155%, falling only 22% since then. While this has meant either a windfall profit or an ever decreasing possibility of ever getting on the property ladder – depending on your perspective – the increase in wealth has not affected the average homeowner in Spain in terms of tax liability unless the property was sold and capital gains tax became due. This is about to change with the reintroduction of the wealth tax in Spain.

The wealth tax was never in fact withdrawn but rather any liability was exempted at a rate of 100%. Given the current crisis in government funding, the tax exemption is to be withdrawn, although the final decision must be made by the 17 regional governments in Spain.

Whether or not you will be liable for the wealth tax in Spain will therefore depend in which region you and your assets in Spain are located. located.

The next step is to determine the value of your assets – for the vast majority this means property. There is an exemption before which the tax applies, and this has been increased to €700,000 along with an exemption on property of up to €300,000 which effectively removes those with a total wealth of €1,000,000 from the tax. The government believes that the tax will thereby affect 160,000 people in Spain and drive revenue from the measure of €1bn.

Asset Valuation Rules

There are existing rules that are applied by the public administration to value property for the purposes of taxation. There are in fact three methods used to value a property:

  1. Catastral Value: This value is that which appears on the catastral registry and tends to be quite outdated and not representative of current market values.
  2. Purchase Price: Rather than the actual purchase price it is the price which appears on the deeds of transfer (in Spain the two are not always or even often the same) that this method measures.
  3. Other taxes: While the IBI tax uses a version of the catastral value, other taxes can also be used to assign a value to the property.

With regard to the wealth tax, the central Revenue service in Spain plan to use whichever is the highest of the above listed values.

Once the value of the property is determined it is important to understand how this amount is distributed. Where the property is owned by more than one person, for example by a married or unmarried couple, the attributed value must be divided between the two equally. Of course, it is necessary to divide only that value which exceeds €300,000 as below this amount is exempt.

Should the wealth of any individual exceed €700,000 the tax will be applied and it is currently being estimated that approximately 160,000 people will be liable to pay the new tax.

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Wealth Tax (Modelo 714)

This service is available across Spain

Location

1Who is this Service for?

This tax on Spanish tax residents made a comeback in recent years – after a long time in the wilderness - in an effort by the Spanish government to improve its finances.

It is applied over a person’s assets i.e. not on income but on acquired wealth and has been devolved to the Autonomous Regions so the specific tax will depend on where you live.

Typically the tax applies to anyone with accumulated wealth greater than 700,000€, though in some regions it is lower (Cataluña, Extremadura and Aragón).

2What does this service consist of?

  • Reminder each year in advance of the statutory declaration date
  • Advice from an experienced English-speaking accountant on the information and documentation needed to make the appropriate tax return
  • Submission of the tax on your behalf with confirmation of the satisfactory completion of the tax return
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3Free Support Services Included

When combined with the free and innovative Advocate Abroad support services you can be sure that you are obtaining completely transparent legal services from registered and regulated English-speaking lawyers abroad.These support services include:

  • Verification of the regulatory status of your professional.
  • Fees as recommended by the Local Professional Body
  • Fees specified in advance and legally guaranteed.
  • Service levels agreed in advance and guaranteed.
  • All professionals must hold professional indemnity insurance.
  • Professionals' proficiency in English monitored.
  • Continuous quality controls and reviews.

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