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THE REINSTATED SPANISH WEALTH TAX
As we all know, the Spanish Wealth tax was suspended in 2008 by the socialist Spanish government. The tax was not abolished, but there was a 100% tax allowance and therefore, the last wealth tax return filed by an individual, resident or nonresident in Spain, was related to the fiscal year 2007.
Because it was “suspended” and not abolished, the same Spanish government brought back the Wealth tax in September 2011 by the Royal Decree-law 13/2011 (17 September 2011) as an “emergency financial measure”. In accordance to the text introducing the tax law, the Wealth tax is reinstated for the years 2011 and 2012.
The Wealth tax applies to individuals, residents and non residents in Spain and it consists in a percentage levied on the tax payer’s net assets value. As a summary, the different regime for residents and non residents is as follows:
1. Residents in Spain
There is an exemption amount for 700.000 €
The tax exemption amount for the taxpayer’s home is 300.000 €
2. Non residents
There is no exemption as for 1. Therefore, an individual nonresident in Spain would have to pay the Wealth Tax on the total net assets held in Spain.
Although the tax was implemented by the Central Government in Madrid, the different regional communities approved the percentages applicable. The Andalucian government approved the applicable rates by the law 17/2011 23 December 2011.
The rates applicable in Andalucía are as follows:
Tax rate band Tax quota Tax on band Tax rate

0 0 167.129,45 0,22%
167.129,45 367,68 167.123,43 0,33%
334.252,88 919,19 334.246,87 0,55%
668.499,75 2.757,55 668.499,76 0,99%
1.336.999,51 9.375,70 1.336.999,50 1,43%
2.673.999,01 28.494,79 2.673.999,02 1,87%
5.347.998,03 78.498,57 5.347.998,03 2,31%
10.695.996,06 202.037,33 thereafter 2,75%



Example 1
Mr and Mrs S own a house in Spain for which they paid 1.000.000 euros in 2005 and the value shown in the property tax is 423.690 €. No other assets i.e. bank accounts or cars.
This is the situation in December 2011.
In 2012, they would pay the Wealth tax as follows:
1. Mr S 500.000 € as net value for Wealth tax. Total tax to pay 1.830,80 €
2. Mrs S 500.000 € as Mr Jones. Total tax: 1.830,80 €
3. Total for both: 3.661,59 €
Example 2
Mrs T owns a property with a value for Wealth tax of 3.000.000 € with a mortgage with a pending capital to re pay to the bank for 500.000 €
Mrs T net assets value for WT: 2.500.000
Tax to be paid by Mrs T.: 26.006 € (approx)
Example 3
Mr D owns a property with a value for Wealth tax of 7.500.000 € with no debts.
Total wealth tax for Mr D would be approx. 116.659,82 €
Annual income tax for nonresident individuals owning property in Spain remains unchanged and therefore, the Wealth tax quota must be added to the Income tax.
In my opinion, this is a step back with very negative results for the owners of holiday homes in Spain, introduced in a period of time when the crisis is affecting many of our non resident tax payers. It will also have a negative effect to prospective buyers when they realize that they have to pay an extra tax to the Spanish Inland revenue for holding property. There is also a relevant discrimination between the treatment to residents and non residents and we find no reason why the same exemptions do not apply to the second ones.
Belen Cepero
January 2012