Starting on January 1, 2023, all residents of Spain with a net worth greater than €3,000,000 will have to pay the Temporary solidarity tax on their wealth. This new tax applies not only to the tax residents of the country but also to the people who have assets in Spain.
What is the nature of this tax?
The state classifies it as a direct tax, personal in nature, and complementary to the Wealth Tax, levied on individuals’ net worth for an amount greater than €3,000,000. This tax is not a tax on income but on assets and holdings.
According to authorities, around 23,000 people, or 0.1% of the taxpayers in Spain, will pay this tax, bringing €1.5 billion to the Spanish budget. This tax implementation aims to support Spain’s most vulnerable population groups financially.
Does it affect all the regions of Spain?
This new tax measure does not apply to the Basque Country and Navarra. However, we suspect that the Mixed Commission of the Economic Agreement with the Basque Country and the Commission of the Economic Agreement with Navarra will agree upon adapting to this tax.
Who needs to pay this tax?
You will need to pay this Temporary solidarity wealth tax if you maintain a net worth of more than €3,000,000 on December 31 of each year until the renouncement of this tax.
Unless there is proof of a patrimonial transfer or loss, the state will consider the assets that belonged to you at the time of the previous accrual, to form part of your net worth.
Residents have to pay this tax on their worldwide income and assets. In contrast, wealthy non-residents pay taxes on their Spanish assets.
Remember that non-residents can use regional wealth tax cuts.
Are there exemptions?
The state exempts some assets from wealth tax, including Historical Heritage Assets, art objects, antiques, the work of artists, household trousseau, habitual residence, the rights of economic content linked to social security systems, and items affected by economic activities and participation in entities.
What are the tax rates?
The government based the tax rate on the level of wealth.
If your net worth is
- from €3,000,000 to €5,000,000, the tax rate will be 1,7%
- from €5,000,000 to €10,000,000, the tax rate will be 2,1%
- from €10,000,000, the tax rate will be 3,5%
What is your taxable and payable base?
The tax base is the value of your net worth, which the state determines by measuring the difference between your assets and liabilities, including debts, charges, and encumbrances, when the value of your assets decreases.
In the case of personal obligation and as a minimum exemption, the tax base will be reduced by €700,000.
How does it work with the already existing Wealth Tax?
The government didn’t clarify this question. But according to government sources, the new solidarity tax is deductible from the wealth tax. So in practice, the government will only include the new solidarity tax in regions where they scrapped or cut the wealth tax. This way, they will ensure that no taxpayers pay twice for the same assets.
What is the new tax validity period?
The Temporary solidarity wealth tax came into force on the 1st of January, 2023, and the government plans to keep it for at least two years. At the end of this period, there will be an evaluation to assess the tax results and propose its maintenance or abolition, where appropriate.
Are there deductions and bonuses in the fee?
The government established that the deduction for taxes paid abroad is applicable in the same terms as those found in article 32 of Law 19/1991 in the case of personal obligation to contribute.
Likewise, the bonus regulated in article 33 of Law 19/1991 applies to assets or rights in or exercised in Ceuta and Melilla, Spanish enclaves sitting on the northern shores of Morocco’s Mediterranean coast.
Lastly, it is possible to deduct the IP quota for the year paid.
Are there other important tax changes for investors?
The new solidarity tax is not the only measure implemented by the government to achieve more progressive taxation. There are also plans to increase the income tax rate from 26% to 27% for people earning more than €200,000 per year. Capital gains tax for incomes above €300,000 will increase from 26% to 28%.
Spain vs Portugal: Which Golden Visa works better for you?
How does the Spanish residency by investment program work?
Spain launched its Golden Visa program in 2013. Spanish residency by investment program grants investors and entrepreneurs the right to live, study, and work in Spain if they invest a minimum of €500,000 in real estate. You can purchase one or more investment property units to achieve this number. The prices of properties in Spain have declined in recent years, which means good potential for capital gains in the future.
You can renew your residency under the Golden Visa program without actually living in the country. The state will grant you the first residency permit for one year. Then you can renew it for three years, and after that, every five years. As an applicant, you will need to maintain your investment if you wish to renew your residence permit.
However in order to apply for Spanish citizenship after ten years, you must permanently spend at least 5 out of 10 years there.
What if I want to apply for EU citizenship in the future but can’t live for a minimum of 9 months in a year in one country?
Suppose your work or lifestyle doesn’t allow you to spend almost all year in one place. In that case, you should consider the Portugal Golden Visa program, which remains the only program in Europe that doesn’t require you to actually reside in the country to be able to apply for citizenship later. To qualify, you must spend a minimum of only seven days per year in Portugal. Also, you can apply for citizenship after just five years, which is twice less than in Spain.
Here are the three most popular routes to Portugal’s Golden Visa:
- Purchasing property within an approved area for €500,000
- Purchase renovated and rehabilitated property within an approved area for €350,000; some properties under this route may qualify for a 20% discount if the property is in a low-density area (making the investment amount €280,000).
- Investing €500,000 in a private equity or venture capital fund
If you are interested in obtaining European citizenship but not interested in actually residing in Europe, then you may want to explore these options.