How is Spanish wealth tax calculated for non-residents who own property in Spain?

A non-resident for tax purposes in Spain who owns property there is liable to the Impuesto sobre el Patrimonio (Spanish wealth tax) on a limited liability basis (obligación real, article 5 of Law 19/1991). Only assets and rights located, exercisable or to be fulfilled in Spain are taxed, not worldwide wealth. The tax accrues on 31 December each year, based on the assets held on that date.

1. Valuing the property

Under article 10 of the Wealth Tax Law, each property is valued at the highest of these three values:

• The cadastral value shown on the IBI (Spanish council tax) bill.
• The value set or verified by the tax authorities for other taxes.
• The purchase price, consideration or acquisition value.

Other assets and rights located in Spain are added to the property: bank accounts, vehicles, household contents or shares in Spanish companies. Since 2022, shares in non-resident companies whose assets consist of at least 50% Spanish property are also included. Holding a home through a foreign company therefore does not avoid the tax.

2. Deductible debts

For non-residents, article 9.3 of the law only allows the deduction of charges and encumbrances on assets located in Spain and debts taken on to acquire them, such as the mortgage balance outstanding on 31 December. Personal debts unrelated to those assets are not deductible.

3. Taxable base and tax-free allowance

The difference between the value of the assets and the deductible debts is the taxable base (net wealth). From this figure the tax-free allowance is deducted, generally €700,000 (article 28). The autonomous regions may set a different amount. Non-residents can apply the rules of the region where the highest value of their Spanish assets is located, including its allowance, tax scale and reliefs. So an owner of a home in Ibiza should check the current rules of the Balearic Islands.

4. Progressive scale and tax due

A progressive scale is applied to the taxable base: the higher the net wealth, the higher the rate. Any regional reliefs are then applied. The combined cap with Spanish income tax (IRPF) in article 31 is designed for resident taxpayers and generally does not benefit non-residents.

5. Solidarity tax on large fortunes

Net wealth above €3,000,000 must also be assessed for the Impuesto Temporal de Solidaridad de las Grandes Fortunas (temporary solidarity tax on large fortunes, Law 38/2022). This tax also applies to non-residents on their Spanish assets. Wealth tax paid is credited against it, so it acts as a top-up in regions with generous reliefs.

6. Filing: Modelo 714

The return is filed online with the Spanish Tax Agency (AEAT) using Modelo 714 (Spanish wealth tax return), usually within the same period as the income tax campaign. It must be filed when tax is payable or, in the cases set out in the law, when the value of the assets exceeds €2,000,000 even if no tax is due. It is also worth checking the double taxation agreement with your country of residence, although property can usually be taxed in the country where it is located.