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Wealth Tax & Inheritance Tax

When you buy a property in Spain, it is important to make sure you are informed of all the taxes in advance. Many people are caught out by laws they are not necessarily aware of and this can result in more tax being paid. Professional guidance will prove invaluable.

In order to make sure you are fully informed, following is some information that may be of interest to you:

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Wealth Tax (Patrimonio) in Spain

Most foreigners moving to Spain or buying a property here, understand that they will have to pay Spanish taxes such as income tax, capital gains tax and inheritance tax. Not everyone, however, is aware that non-residents buying in Spain must also pay wealth tax in Spain, rather than in their country of residence.

Spanish Wealth Tax is payable by both residents and non-residents (if they own property in Spain), although the rules are different. Residents pay wealth tax on their worldwide assets but have quite generous tax-free allowances, whereas non-residents are only liable for their net assets within Spain but miss out on some of the allowances that tax residents benefit from.

Wealth Tax in Spain – Deductions

Wealth Tax in Spain – Deductions

Non-residents are entitled to an individual deduction of €700,000 per person. So, for example, a non-resident married couple buying a property in Mallorca, Ibiza, Menorca (or in another region of Spain) will have a combined tax-free allowance of €1,400,000 on their total net estate.

The wealth tax is calculated on net assets, which means you can deduct the mortgage too, therefore considerably reducing the tax paid each year.

Spanish Wealth Tax Rates

Spanish Wealth Tax Rates

The current wealth tax rates are applicable to each persons individual net wealth, the higher the price of the property, the more you are taxed, with a cap set at 3,45% per year for properties in excess of € 10,9 Mio! As stated above, the first €700,000 is the national tax-free allowance per person.

The current wealth tax rates are applicable to each person´s individual net wealth on 31st December of each year, after all relevant deductions are made are as follows:

From € To € Tax Rate % Tax Band € Cumulative Tax €
0 170.472 0.28% 477 477
170.472 340.937 0.41% 699 1.176
340.937 681.869 0.69% 2.352 3.529
681.869 1.336.739 1.24% 8.120 11.649
1.336.739 2.727.479 1.79% 24.894 36.543
2.727.479 5.454.958 2.35% 64.096 100.639
5.454.958 10.909.915 2.90% 158.194 258.833
10.909.915 Onwards 3.45%
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Inheritance & Gift Tax in Spain

As with the wealth tax, inheritance tax is also applicable for non-residents and residents in Spain. Each autonomous area (region) sets its own rules concerning inheritance tax for non-residents, but unlike in many other countries, in Spain it is the recipient or beneficiary that pays the tax.

Due to there being many different rules in relation to inheritance and gift tax, we recommend each individual case is consulted with a tax advisor, our team can recommend good tax advisors if requested.

Many law firms advise non-resident clients to draw up a will before a notary solely for their assets in Spain as this considerably simplifies the inheritance process if and when the time arrives.

How taxes are reduced with a Mortgage for property investment Spain

The value of the property will be reduced by the mortgage in order to avoid tax payments but only if the mortgage is in place at the same time as the purchase! So, it makes sense to seek financial support at the very beginning, even if you have the funds to purchase the property.

In addition, it is difficult in Spain to release equity at a later stage, therefore it makes sense to seek for financial support at the time of purchase for various reasons:

  • Tax benefits (wealth tax and inheritance tax)
  • Low interest rates allow you to make more on your funds and maximize return on investment
  • Maintain liquidity for other purposes
  • Diversify your Spanish property investment options

We always recommend our clients to finance as much as possible upon completion in order to obtain all the benefits. A mortgage for spanish property is deductible when it is set up upon completion or during a short period of time after the purchase (a few months). In Spain it has to be linked to a Spanish property to be deductible for tax purposes. Banks are not as keen to set up a mortgage after the purchase, so it is always better to have it all prepared to sign at the time of purchase at the notary.

Property value used to calculate the wealth tax and inheritance tax

The property value taken into account for wealth tax purposes is the highest of the following three values:

  • The officially registered council tax (valor catastral)
  • The value taken into account for any other tax purposes (given by the Tax Office)
  • The price in the purchase agreement

The same values / rules apply for inheritance and gift tax purposes in Spain.

In properties of a higher value, not only are the savings linked to the wealth tax important, but clients must also take into consideration that with the low interest rates available today it makes much more sense to mortgage and obtain an important return on propery investment in Spain by investing the funds, with the possibility of easily cancelling the mortgage in years to come if the interest rates were to go up.


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