Non-Resident Tax in Spain
Like in many other countries, Spain has its own set of taxes in place that also apply to non-residents. Before establishing your home or your business in the country, it is worth checking with legal experts like those at Del Canto Chambers to ensure that you are fully aware of all possible expenses. This is because mistakes in schedules, quantities or forms can end up increasing your bill through fines and other punishing costs.
One particularity of Spanish taxation that might not be present in many countries is the geographical differentiation of certain duties. Since, many times, these changes are due to particular political dynamics, you might be better advised by legal experts with international experience, like those at Del Canto Chambers.
How Different Are Spanish Inheritance and Wealth Taxes?
From a general point of view, inheritance tax differs in Spain in some respects. First, in the case of inherited properties, the tax has to be paid to be able to sell the property. That is, income generated by the sale cannot be used to cover the tax. Additionally, every single one of the inheritance beneficiaries have to declare it. Finally, it should be noted that beneficiaries must declare the tax before the end of a half-year period. If not, subsequent quarters add a small levy up until it reaches a maximum of 20%. All of this means that, for those for substantial or even average property ownership, it is better to have all affairs in order.
With regard to the wealth tax, it was meant to expire this year but recent changes have resulted in its extension. It is payable by residents and non-residents alike, after assets are assessed at the end of every year. Of course, non-residents are only liable for their Spanish assets. Some of the latter are exempt too: pension plans, intellectual property rights, business assets, shares… It is important to conduct a full assessment with expert property lawyers to understand where and why certain exemptions could apply.
How Does the Spanish Wealth Tax Work Across Autonomous Communities?
First, the general rule is that no one (non-resident or resident) is taxed through the wealth tax if the combined value of their assets does not exceed EUR 700,000. The tax in itself is progressive, meaning it starts from a band of 0.2% up to 2.5%. However, these rates are only the ones applied by the central government. Autonomous Communities can change the boundary for applying the tax and also the percentage charged through bands.
For example, in Catalonia at the moment of writing the allowance decreases to EUR 500,000 and both the initial rate and the top rate are slightly higher (0.21%, 2.75%). On the other hand, Madrid chooses to provide a full tax relief, which means that residents are not liable for this tax. At the same time, while Madrid has been known for having a less stringent tax regime for a long time, since very recently Andalusia has also become more favorable to residents and non-residents in terms of wealth and inheritance.
How Does the Spanish Inheritance Tax Work Across Autonomous Communities?
As stated above, Andalusia recently changed its criteria and removed both the inheritance and gift tax. This means that both transferences between spouses and other family members are practically removed. As for gifts, which are traditionally taxed at around 10% across Spain, are now limited to 1%. Again, since these are the result of recent political changes, it could be the case that it changes in the future; or that other regions become even more attractive.
Certainly, to avoid tricky situations, the best possible avenue is to consult one of our tax experts. While many British expats have lived in the country for a long time, they might be unaware of ongoing reforms and other changes to tax systems that can make them lose income. This is easily avoidable; and it is actually better not to wait until you are facing the actual situation of asset transfer or end-of-year wealth assessment.
Which Assets Are Exempt from the Wealth Tax?
While this is not an exhaustive list, these are some examples of assets that are not liable under wealth taxes, regardless of location in Spain.
- Retirement, savings and pension plans under certain conditions
- Domestic items and appliances
- Intellectual Property (rights, patents, etc.)
- Goods used for business purposes
- Shares in some entities; but there are ownership percentages that have to be respected
- For residents only: a main home up to EUR 300,000
Living in Spain but a Non-resident?
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