Update on Spanish Wealth Tax
December 11th, 2008
Good news for Spanish residents and anyone owning property in Spain – as we move into 2009 there is no longer any requirement to pay Spanish wealth tax or even file a wealth tax return.
The abolition of wealth tax in Spain from 1st January 2008 was approved by the Council of Ministers on 18th April 2008, although approval by the Spanish parliament has yet to be confirmed. The liability to pay wealth tax was eliminated through a 100% wealth tax relief. The measure will apply for the Spanish tax year 2008 for which returns are due in 2009.
Wealth tax is a tax on assets held as at 31st December each year. Residents are taxed on worldwide assets and receive deductions. Non-residents are taxed on Spanish assets without allowances. The tax rate ranges from 0.2% to 2.5%.
Of course there are still various other taxes due on Spanish property.
When purchasing a property in Spain you can expect to pay 6% transfer tax (ITP) (7% in Andalucia). If the property is a new build or a resold unregistered property there will be 7% Spanish VAT (IVA) to pay.
Annual local property tax will range from £100 to £400 depending on the size of the property. There may be additional taxes in some areas for rubbish collection and special projects.
If you let the property there will be a tax on the rental income. Only 50% of the net rental income of a Spanish resident is taxable at the normal scale rates from 24% to 43%. Non-residents pay 24% on gross income.
On disposal of the property you will be liable for capital gains tax at 18% for residents and non-residents plus a tax on the gain on the land called Plusvalia of 20%-30%.
Information from Blevins Franks Tax Advisory Service
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