Just when you thought that it was safe to win the lottery in Andalusia or Madrid, the socialist Spanish government have introduced a new
temporary Solidarity Tax.
Am I paying too much Wealth Tax in Spain?
By John Hayward
This article is published on: 21st February 2023
According to Investopedia, a solidarity tax is a government-imposed tax that is levied in an attempt to provide funding towards theoretically unifying (or solidifying) projects. In other words, it is a tax on the wealthy to provide funds for the not so wealthy. Other regions still have Wealth Tax with varying allowances and this will continue without the risk of having to pay two taxes. That said, taxes are rarely straightforward and I am confident that there will be issues in the future which will result in the Spanish tax office tweaking things. It is interesting, if not extremely concerning, that Wealth Tax was introduced on a temporary basis as well. It has been around for the last 11 years. So, not really temporary in my opinion.
We are in Modelo 720 season at the time of writing, with overseas assets having to be declared by 31st March. Although not a tax declaration, the Modelo 720 naturally leads on to Wealth Tax. One of the asset types to declare is property.
In Spain, the tax office can reference the Cadastre to establish a property value. However, they do not have access to the land registry in, say, the UK. Therefore, the only price that is in writing is the purchase price. It is this value that should be entered on the Modelo 720 and subsequently be liable, or not, for Wealth Tax. My suspicion is that people have declared what they believe to be the market value and are possibly paying too much in Wealth Tax as a consequence.
By redistributing wealth and utilising the allowances, and applying the 60% rule (contact me for more information), it is possible to reduce Wealth Tax (and/or Solidarity Tax) or even eliminate it completely.
We can introduce you to investment products that are not only tax efficient in Spain in terms of income tax but can help to reduce Wealth Tax.