The Spanish wealth tax, known in Spain as ‘patrimonio’ (Impuesto sobre el Patrimonio) has been abolished by Spain’s socialist government, fulfilling an electoral promise made 4 years ago before the Socialists (PSOE) took power.
The wealth tax has been abolished as of 01/01/2008, so the change does not affect tax declarations for the tax year 2007 (for which tax returns are currently being submitted – deadline end of June).
For most non-resident property owners the tax bill for the wealth tax was never very big. For example, for a property in Catalonia valued at 300,000 Euros with no mortgage the wealth tax was approximately 730 Euros per annum, but for most owners it would have been significantly less than that (lower property value, mortgage, etc.). Its elimination will nevertheless be welcome at a time when municipal taxes, mortgage rates, and other overheads for property owners are on the rise.
The Spanish wealth tax was introduced 30 years ago as a temporary tax, but like all ‘temporary’ taxes, it long outstayed its welcome. It requires everyone (residents and non-residents alike) who owns property or other taxable assets in Spain to pay an annual wealth tax based on the net value of those assets after permitted deductions, such as mortgages. This tax is collected by regional governments, so the national government will have to find some way to compensate them for lost revenues.
The elimination of Spain’s wealth tax was announced in April as part of a raft of measures designed to stimulate an economy struggling with a real estate sector downturn.
All non-resident property owners who have been paying the wealth tax to date will also have an appointed fiscal representative in Spain, as required by law. To avoid any risk of overpaying a fiscal representative during tax declarations for 2008 (which take place in May-June 2009), non-resident owners should contact their fiscal representative now to ensure that the correct services and fees are in place for 2009.