Wealth tax in Spain
What is the Wealth Tax?
Wealth tax (IP), regulated by Law 19/1991, is adirect, general and personal tax on the ownership or possession of wealth, levied on its net value, on a periodic basis. It is a strictly individual tax levied on individuals and is complementary to personal income tax.
It is a state tax, established and regulated by the State, the total yield of which is assigned to the autonomous communities. The ownership of the competences of management, liquidation, collection, inspection and revision of the tax corresponds to the State, without prejudice to the provisions of the respective laws of cession to the autonomous communities.
How is the tax return for this tax filed?
It is obligatory to file it electronically, by Internet. The self-assessments of the wealth tax must be made from the web form of form 714.
The Tax Agency reminds that whoever files a wealth tax return is also obliged to file the income tax return for that year.
How is a person’s net worth determined?
The Tax Agency explains that the net wealth is the difference between the amount of the gross wealth (the total value of the non-exempt assets) and the total deductible debts.
Indirect holding of real estate (through companies)
Law 38/2022, of December 27, creating the ITSGF, modifies certain tax rules and clarifies that securities representing the participation in the equity of any type of entity, not traded in organized markets, whose assets consist of at least 50%, directly or indirectly, of real estate located in Spanish territory will be considered to be located in Spanish territory in order to avoid tax avoidance through corporate interposition in the holding of real estate. For this purpose, it establishes that in order to compute the assets, the net book values of all the recorded assets will be replaced by their respective market values determined at the date of accrual of the tax. In the case of real estate, the net book values will be replaced by the values that must operate as the tax base in each case, in accordance with the provisions of Article 10 of this Law (i.e., the highest of the following three values: the cadastral value, the value determined or verified by the Administration for the purposes of other taxes or the price, consideration or value of the acquisition). In this regard, it should be remembered that the DGT in Consultation V1947/2022, of September 13, has maintained that.
“the wealth tax is not levied on the ownership of shares or participations of companies not resident in Spain that are owned by individuals not resident in Spain, who must only pay the tax on the ownership of assets and rights located, which can be exercised or must be fulfilled in Spanish territory“.
Temporary Tax on the Solidarity of Great Fortunes (ITSGF)
By means of Law 38/2022, the Temporary Solidarity Tax on Great Fortunes (ITSGF) is created, which is configured as a complementary tax to the State IP, not subject to transfer to the Autonomous Communities, in order to tax with an additional quota the assets of individuals with an amount greater than 3,000,000 euros, with the purpose of demanding a greater effort from those who have a greater economic capacity and to reduce the differences in the taxation of assets in the different Autonomous Communities, especially in those that have totally or partially defiscalized the Wealth Tax. This new tax basically coincides in its configuration with that of the IP, both as regards its territorial scope, exemptions, taxpayers, taxable and net taxable bases, accrual and tax rates, as well as the limit of the total tax liability. The fundamental difference lies in the taxable event, which only taxes those net assets exceeding 3,000,000 euros.
