Wealth tax in Spain, known as “Impuesto sobre el Patrimonio,” is a tax levied on the net value of an individual’s assets. It’s a progressive tax, meaning that the rate increases as the value of the assets rises. Here’s how it works and how it is generally calculated:
Who is Subject to Wealth Tax in Spain?
- Residents: Spanish residents are subject to wealth tax on their worldwide assets. You are considered a tax resident in Spain if you spend more than 183 days in the country during a calendar year or if Spain is the main base of your economic interests.
- Non-residents: Non-residents only pay wealth tax on assets located in Spain (like real estate, bank accounts, or investments within Spain).
Exemptions and Allowances
- There is a general exemption threshold that varies by autonomous community but is usually around €700,000 per individual. This means that the first €700,000 of your net wealth is not subject to tax.
- Primary Residence: There is usually an additional exemption for the value of your primary residence, often up to €300,000 per person.
How Wealth Tax is Calculated
The calculation of the wealth tax involves several steps:
- Determine the Value of Assets:
- You need to list all your assets, including real estate, bank accounts, investments, vehicles, jewelry, art, life insurance, and other valuables.
- The value of each asset is generally the market value as of December 31 of the tax year.
- Deduct Liabilities:
- Any debts or liabilities that you owe (such as mortgages or loans) are deducted from the total value of your assets to arrive at your net worth.
- Apply Exemptions:
- Subtract the applicable exemptions (e.g., €700,000 individual threshold and up to €300,000 for the main residence).
- Calculate the Taxable Base:
- The remaining amount after exemptions is the taxable base.
- Apply the Progressive Tax Rate:
- Apply the relevant tax rate to the taxable base. Rates vary by autonomous community but generally range from around 0.2% to 3.5%, depending on the value of the assets.
Progressive Wealth Tax Rates (Approximate National Scale)
| Taxable Base (in €) | Tax Rate (%) |
|---|---|
| Up to €167,129.45 | 0.2% |
| €167,129.45 – €334,252.88 | 0.3% |
| €334,252.88 – €668,499.75 | 0.5% |
| €668,499.75 – €1,336,999.51 | 0.9% |
| €1,336,999.51 – €2,673,999.01 | 1.3% |
| €2,673,999.01 – €5,347,998.03 | 1.7% |
| €5,347,998.03 – €10,695,996.06 | 2.1% |
| Over €10,695,996.06 | 3.5% |
Wealth Tax Example Calculation
Imagine you have total worldwide assets worth €2,500,000, with a mortgage of €500,000 on your main residence, which is valued at €600,000.
Here’s how the wealth tax would be calculated:
- Total assets: €2,500,000
- Liabilities: €500,000
- Net wealth: €2,000,000
- Exemptions:
- General exemption: €700,000
- Primary residence exemption: €300,000
- Taxable base: €2,000,000 – €700,000 – €300,000 = €1,000,000
Applying the progressive rates to the taxable base of €1,000,000, you calculate the tax due based on the thresholds, progressively increasing the rate as the amount increases.
Regional Variations
- The wealth tax rates and exemption thresholds can vary depending on the autonomous community where you reside.
- Madrid has a 100% exemption (meaning residents pay zero wealth tax).
- Andalusia also eliminated the wealth tax recently.
- Other regions have slightly different scales, and some offer significant reductions or higher exemption amounts.
Key Points to Remember
- Progressive Rates: The higher your net wealth, the higher the percentage of tax you pay.
- Personal Situation: Married couples can often split their assets to benefit from higher combined exemptions.
- Double Taxation Avoidance: Spain has agreements with some countries to avoid double taxation for non-residents.
Wealth Tax Filing
- The wealth tax return must be filed separately from your income tax return, typically by June 30th of the following year.
- You only need to file if your taxable wealth exceeds the exemption threshold or if the value of your assets exceeds a specified amount (usually around €2 million, even if no tax is due).
Wealth tax laws in Spain can be complex and vary significantly by region, so it’s recommended to consult with a tax advisor to understand your specific obligations.
Here is a list of every autonomous community in Spain along with the wealth tax information for each. Please note that wealth tax rates and exemptions can vary and may be subject to changes over time, as each autonomous community has the ability to adjust rates or even eliminate the tax:
Wealth Tax by Autonomous Community in Spain
| Autonomous Community | Wealth Tax Rate (Approximate) |
|---|---|
| Andalusia | Wealth tax abolished as of 2022 |
| Aragon | Progressive rates from 0.2% to 3.5% |
| Asturias | Progressive rates from 0.22% to 3% |
| Balearic Islands | Progressive rates from 0.28% to 3.45% |
| Basque Country (Euskadi) | Different rates depending on the province; in general, ranges from 0.1% to 2.5% |
| Canary Islands | Progressive rates from 0.2% to 3.5% |
| Cantabria | Progressive rates from 0.24% to 3% |
| Castile and León | Progressive rates from 0.2% to 3.5% |
| Castilla-La Mancha | Progressive rates from 0.2% to 3.5% |
| Catalonia | Progressive rates from 0.21% to 2.75% |
| Extremadura | Progressive rates from 0.3% to 3.75% |
| Galicia | Progressive rates from 0.2% to 2.5% |
| La Rioja | Progressive rates from 0.2% to 3.5% |
| Madrid | Wealth tax is fully bonified (effectively 0%) |
| Murcia | Progressive rates from 0.24% to 3% |
| Navarra | Progressive rates from 0.2% to 2.5% |
| Valencian Community | Progressive rates from 0.25% to 3.5% |
| Ceuta (Autonomous City) | 75% reduction on wealth tax |
| Melilla (Autonomous City) | 75% reduction on wealth tax |
Notes:
- Madrid has completely bonified the wealth tax, meaning residents effectively do not pay any wealth tax.
- Andalusia also abolished its wealth tax in 2022.
- The Basque Country and Navarra have their own specific tax regulations due to their fiscal autonomy.
- Ceuta and Melilla offer a 75% reduction to encourage residency and investment in these territories. reduction on wealth tax, this means that residents of these areas are only required to pay 25% of the wealth tax they would otherwise owe under the standard rates.
For example, if a resident of another region in Spain would normally owe €10,000 in wealth tax, a resident of Ceuta or Melilla would only pay €2,500, taking advantage of the 75% reduction. This reduction is designed to incentivize individuals to establish their fiscal residency in these locations by offering a significant tax benefit.
Wealth Tax in Portugal
Portugal does not have a traditional wealth tax, but it does have a form of property tax that targets higher-value real estate called the Adicional ao Imposto Municipal sobre Imóveis (AIMI), or Additional Municipal Property Tax. This tax is somewhat similar to a wealth tax because it only applies to the value of real estate holdings, not to other forms of assets like bank accounts, stocks, or personal belongings.
Key Features of the AIMI Tax
- Who Pays AIMI?
- Individuals: AIMI applies to individuals who own property in Portugal with a total value that exceeds a certain threshold.
- Companies: Corporate entities that own real estate in Portugal are also subject to AIMI.
- The tax is levied in addition to the standard Municipal Property Tax (IMI), which applies to all property owners.
- Exemption Thresholds
- Individuals have a €600,000 exemption. This means that AIMI only applies to the value of real estate holdings exceeding €600,000.
- Married couples or civil partners who opt for joint ownership have a €1.2 million exemption.
- Tax Rates
- For individuals, the AIMI rates are as follows:
- 0.7% on the taxable value of property between €600,000 and €1 million.
- 1% on the taxable value of property exceeding €1 million.
- 1.5% on property values exceeding €2 million.
- For corporate entities, the standard rate is 0.4% on the total value of their real estate holdings, with no exemption threshold.
- Corporate entities that hold properties for residential purposes are subject to a higher rate of 0.7%, and if the value exceeds €1 million, the rate increases to 1.5%.
- For individuals, the AIMI rates are as follows:
Example Calculation for Individuals
Imagine an individual owns a property in Portugal valued at €1.5 million:
- Exemption: €600,000
- Taxable value: €1,500,000 – €600,000 = €900,000
- Tax calculation:
- 0.7% on the first €400,000 (up to €1 million) = €2,800
- 1% on the remaining €500,000 = €5,000
The total AIMI tax owed would be €7,800.
Important Notes
- The AIMI tax is only applied to real estate and does not cover other types of wealth such as financial investments, savings, or other assets.
- The standard Municipal Property Tax (IMI) rates, which are different from AIMI, still apply to all properties in Portugal and range from 0.3% to 0.45% for urban properties.
- Primary residences can also be subject to AIMI if the value exceeds the exemption threshold.
Filing and Payment
- AIMI is assessed based on the Taxable Value (Valor Patrimonial Tributário or VPT) of the property as of January 1 of each year.
- The payment is usually due in September, and property owners will receive a notice from the Portuguese tax authorities regarding the amount owed.
Key Differences from Spain’s Wealth Tax
- Portugal’s AIMI is only levied on real estate and not on other types of assets, unlike Spain’s wealth tax which considers a broad range of assets.
- The exemptions and rates are specific to real estate values, with no impact on financial investments, savings, or other property types.
Conclusion
While Portugal does not have a wealth tax in the traditional sense, the AIMI effectively serves as a form of tax on real estate wealth for individuals and companies with high-value properties. If you have significant real estate holdings in Portugal, it’s essential to understand how AIMI might apply to your property and consult with a tax advisor to optimize your tax strategy.
Disclaimer
Wealth tax is generally calculated on net assets exceeding a certain threshold, tax rates can change and can also vary by community, so it’s important to check specific details with local tax authorities or professionals for the most up-to-date and personalized information.
