A new wealth-tax in Spain is on the cards in 2023 when the so-called ‘Solidarity Tax’ comes into play. It’s designed to raise additional revenue and synchronise wealth tax across Spanish regions by levying tax on assets owned by high-net-worth individuals (HNWIs). This article is a guide to the new tax.
What is the Solidarity Tax?
The Impuesto de Solidaridad or Solidarity Tax is conceived as a complement to the current Wealth Tax in Spain. This tax is levied in most regions (Andalucia and Madrid are notable exceptions) but at varying rates and levels. The Solidarity Tax aims to standardise the tax on HNWIs whose assets exceed a value of €3 million.
When does it come into effect?
From December this year and it will be applicable on tax declarations made in 2023 and 2024 for the previous tax year. (In Spain, the tax year is the calendar year.)
Is it a permanent tax?
Not on paper since the measure is temporary. Its initial run is for the 2022 and 2023 tax years. You would therefore be liable for tax on assets you owned during these two years.
“However, there are no guarantees that it won’t become a permanent feature of Spanish tax,” says Paula Losada at Del Canto Chambers. “It wouldn’t be the first time this has happened.”
What are the rates of the new wealth tax?
The Solidarity Tax will have three levels: 1.7%, 2.1% and 3.5%. The first will be for assets valued between €3 and €5 million; the second, €5 to €10 million; and the third for assets worth more than €10 million. As a result, an HNWI owning assets valued at more than €10 million would pay around €139,000 a year.
Will all my assets be taxed?
It depends on your residency status. If you’re a tax resident in Spain, your net worth includes all the assets you own, inside and outside Spain. If you’re a non-resident in Spain, it applies only to the assets you own in Spain.
What happens if I already pay regional wealth tax?
If the region where you live in Spain or where your assets are located levies wealth tax, the amount you pay will be deducted from your liability for the new Solidarity Tax.
What happens if I already pay wealth tax outside Spain?
Double-taxation treaties may apply, but not necessarily, since wealth tax does not exist in many other countries.
How many HWNIs does the new wealth tax affect?
According to estimates from the Spanish tax authorities, around 23,000 people will be liable for the new Solidarity Tax. The total tax revenue from it is estimated at approximately €1,500 million.
What would you advise?
In light of this new tax, we’d urge all owners of assets in Spain to review their wealth tax situation and take professional advice, preferably from an expert with knowledge of the tax liabilities in Spain and other countries where you own assets. Get an expert opinion to review your personal circumstances and implement potential tax-saving measures.
In addition, non-residents with a net worth of over €3 million in Spain may need to appoint a tax representative before the Spanish authorities.