Financing to Reduce the Wealth Tax in Spain
Spain is part of a very small group within the Organisation for Economic Co-operation and Development (OECD) that maintains a general net wealth tax. Only Norway, Switzerland, and Colombia share this approach, while most European countries have abolished it, opting instead for taxes on specific assets.
What makes the Spanish model particularly distinctive is not only its continued existence but also its dual structure: a regional wealth tax and a state-level surcharge — the Temporary Solidarity Tax on Large Fortunes (ISGF) — which has no equivalent elsewhere.
This analysis, prepared by desalvador., a law firm specialising in real estate law and based in Palma de Mallorca, is aimed primarily at non-resident buyers acquiring high-value properties in Spain, and especially in the Balearic Islands. In this region, wealth taxation requires rigorous and proactive planning from the outset, particularly when the transaction is structured through financing secured by financial assets.
Current Context: Wealth Tax and ISGF
The Wealth Tax, introduced in 1977, has undergone several changes: it was suspended in 2008 and reactivated in 2011, initially as a temporary measure. However, since 2021 it has become a permanent levy, with a marginal rate of 3.5%.
The ISGF, introduced in 2022, applies as an additional tax on net wealth exceeding €3 million. In practice, it seeks to neutralise the advantages enjoyed by regions that had fully exempted the wealth tax, thus harmonising wealth taxation throughout Spain.
Both taxes are levied on net wealth, the difference between assets and liabilities. This allows taxpayers to reduce the taxable base through valid, proven, and properly documented debts.
For non-residents, who are taxed on a real (not personal) basis, only debts directly linked to the acquisition of the property are deductible. Therefore, tax and financial planning must take place before the purchase, ensuring that the financing arrangement meets the deductibility requirements.
When Financing Makes Sense to Optimise Tax
Debt should not be viewed as a tax shortcut but as a strategic decision within overall wealth management. The goal is to integrate financing into a coherent structure for investment, preservation, and reorganisation of wealth.
For non-residents, the two clearest scenarios are financed acquisitions and refinancing, where the link between the debt and the property is explicitly recognised under Spanish law and administrative doctrine. In both cases, it is crucial to properly document the connection between the financing and the property purchase.
In refinancing cases, maintaining the connection with the asset is essential. The Spanish Tax Authority (Dirección General de Tributos) has confirmed that the decisive factor is not the type of instrument used, but the purpose of the capital. For instance, the deductibility of a Lombard loan used to repay a mortgage on Spanish property has been recognised (Binding Ruling V2428-22, 23 November 2022).
Conversely, for non-residents taxed under the real obligation, financing obtained after the property purchase is not deductible, as it is not considered directly connected to the acquisition itself.
This makes early planning particularly relevant for non-resident buyers, since the law requires that the financing be tied to the Spanish asset from the outset and does not recognise later structures lacking this direct link.
For this reason, appropriate advice at the time of purchase is critical. At desalvador., we adopt a preventive approach: we design the financial and documentary structure from the initial stage, coordinating with the lender, the notary, and tax advisors to ensure the transaction is fully protected against future tax reviews. This proactive approach avoids costly mistakes and allows clients to take advantage of legitimate tax benefits with full legal certainty.
Mortgage Financing and Lombard Loans
For non-residents, mortgage loans offer a clear evidentiary advantage: their notarisation and registration in the Land Registry make it easy to prove their existence, amount, and link to the property. This traceability makes mortgages the most robust option from both a legal and tax perspective.
However, Lombard loans — even when arranged abroad and secured by financial assets can also be deductible, provided their direct link to the Spanish property purchase is clearly demonstrated.
Their flexibility makes them attractive for certain high-net-worth profiles, but they require flawless documentation: loan agreements, bank certifications, and complete traceability of fund flows.
For transactions of this kind, the involvement of specialised mortgage brokers such as Lionsgate Capital is essential. Acting as a single point of contact with all banks, both national and international private institutions, they secure the most suitable financing for each client’s property purchase in Spain.
In the case of mortgage financing, the proof is usually straightforward: a mortgage loan granted at the time of purchase and used to pay the purchase price can easily be evidenced through the notarial deeds of sale and mortgage.
For Lombard loans, however, the most common issue is lack of traceability, as it is necessary to demonstrate explicitly that the loan disbursement was applied to the property purchase.
It is equally important to avoid mixed-purpose loans, where part of the funds are used to buy the property in Spain and part for other assets, since lack of direct linkage may jeopardise deductibility.
Mitigation requires thorough prior planning, the use of dedicated accounts for the transaction, consistent banking documentation, and, where appropriate, notarisation of key documents.
In high-value operations, experience shows that three pillars determine success:
- Prior legal and tax planning.
- Perfectly synchronised execution.
- Organised and verifiable evidentiary documentation.
Planning, Security and Efficiency
Tax optimisation of wealth through financing is not a marginal strategy but a legitimate and effective tool that, when properly structured, reduces the tax burden without compromising legal certainty.
Proactive planning is especially important for non-resident buyers, as only liabilities directly linked to Spanish assets are deductible.
Lionsgate Capital collaborates with specialised law firms such as desalvador., as well as tax advisors and financial institutions, both local and international private banks, to design tailored financing solutions for clients. The main objective is for each client to optimise their wealth structure, combining profitability, legal security, and tax efficiency.
Financing is not merely a financial tool; it is an instrument of smart wealth planning. When properly designed and executed, it achieves the right balance between profitability, legal security, and tax efficiency.
Article by Pelayo de Salvador
Real estate law expert at desalvador.
desalvador. is a boutique law firm specialising in residential real estate transactions in Mallorca, offering preventive legal strategies and personalised legal advice tailored to international clients.
