Spain plans to introduce new wealth tax

The Spanish government plans to introduce a new wealth tax for the foreseeable future, which will begin to be collected in 2023. Officials say that, as with the tax on banks and energy companies, it will be temporary but could be extended depending on the circumstances.

Neither the size of the fortune that will be subject to this tax nor the formula by which it will be calculated is yet known. Amounts are quoted from 1 to 10 million euros, and this includes bank accounts, real estate, and other valuable property. However, representatives of the Spanish authorities claim that the tax will only affect the interests of 1% of the country’s population – millionaires with “great wealth”. However, there is no legal definition of “great wealth” in Spanish law.

Until now, wealth in Spain was subject to a tax, the power to collect which the state transferred to the autonomous communities. It applied to estates exceeding €700,000 less €300,000 from the value of the property that is the main residence. The minimum threshold has been reduced in some regions – for example, in Aragon, where it is 400,000 euros, or in Catalonia, Extremadura and the Valencian Community (500 thousand euros each).

However, the Spanish Constitution does not allow the same tax to be levied twice, so two taxes on the same wealth cannot coexist at the same time. Faced with this circumstance, the Spanish government is considering several options. According to government sources, the first is to abolish the wealth tax and replace it with a tax on large fortunes. Another option is to tax not wealth, but high incomes, thereby raising personal income taxes to the highest levels. Thus, the two taxes will not apply to the same taxable event.

The wealth tax, abolished in Spain in 2008, was subsequently reinstated on a temporary basis to combat the financial and economic crisis, and made permanent in 2021. In 2020, it was declared by about 200 thousand individual taxpayers with an average wealth of 3.5 million euros. This wealth includes real estate, shares, deposits, jewelry, cars with an engine capacity over 125 cc, art and antiques.

Currently, Spain is the only EU country that levies a tax on net wealth, that is, on the total amount of assets and economic rights of an individual. On the other hand, in Belgium, Italy and France there is a tax that applies to certain assets.

In particular, Italy applies a tax of 0.76% on the taxpayer’s property and investments located abroad. In Belgium, last year a tax of 0.15% on the amount of securities was approved. In France, Macron abolished the wealth tax in 2018 and now has a tax on high-value properties. If the value of an individual’s real estate exceeds 1.3 million euros, then a tax of up to 1.5% may be levied.

Another unanswered question is whether the new tax will affect the interests of foreigners with assets in Spain. In 2013, the Golden Visa program was introduced, under which a residence permit in Spain is granted to foreigners not residing in the EU if they have purchased real estate for a total amount of 500,000 euros. Its goal was to attract investment to Spain, but now investors, many of whom already have permanent residence status and are preparing to obtain Spanish citizenship, may find themselves in a very “interesting position.”

It has not yet been clarified whether all foreigners who own property in Spain will be subject to the new tax on large fortunes in the same way as Spaniards. However, they do have the risk of being targeted, since the ruling social-communist coalition is determined to bring its intentions to life.

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