Spanish Wealth Tax

[DesWalker]

Hi All,

I'm trying to learn how the Spanish wealth tax works for Brits considering a permanent move to Spain and I'm confused about the allowable deduction for one's house.

Suppose a single person has total assets comprised of € 900,000 in cash and a Spanish property worth € 100,000. Total assets are € 1 million.

First one deducts the € 700,000 tax free allowance to reduce things down to € 300,000.

Next there is the permanent dwelling deduction, but I'm unsure in this example whether the appropriate amount to deduct is € 100,000 (ie the total value of the property) or € 300,000 (ie the total exemption allowable for a property). Clearly if it is the former then the remaining € 200,000 will be taxable but if it is the latter then there will be no wealth tax to pay. Common sense says it is the former but other websites have got me wondering if it could possibly been the latter.

Many thanks for any replies.

Des

[El Cid]

You cannot deduct more than the value of the house - that would clearly be wrong.

For the record, for a couple, you get up to 300k each for the house and 700k each for the rest. In other words, unless you have a combined wealth of over 2m you pay no tax.

Sid

[DesWalker]

Thanks Sid,

I thought so. Common sense prevails.

When calculating and reporting one's assets how should motor vehicles be handled. It seems strange to have to include one's car in such considerations. Once again, some websites say that all vehicles should be disclosed, some say only high-value sports cars and others don't mention vehicles at all.

Many thanks,

Des

[El Cid]

Forget what it says on websites - go to the only reliable source - the Spanish law on wealth tax which says (thanks to Google translate) :-

Article 18. Jewelry, furs and sumptuary vehicles, vessels and aircraft.

Jewelry, furs sumptuary, cars, two- or three-wheel, having a cylinder capacity equal to or greater than 125 cubic centimeters, pleasure boats or water sports, airplanes, planes, boats and other aircraft, calculated by the value market on the date of accrual of the tax.

Taxpayers may use to determine the market value tables actual value of used vehicles approved by the Ministry of Finance, for the purposes of transfer tax and stamp duty and inheritance tax, which in force on the date of accrual of the tax.

The car values are the same as those used when you register a foreign car in Spain and are published by the tax office. The value is based on the original cost of the car depreciated depending on the age of the car.

[DesWalker]

Many thanks again Sid. So family runabouts must be included in a list of one's assets.

My final question is about disclosure and then I'll stop bugging you.

Does an average Spanish resident have to disclose all their assets on their annual tax return each year even if they always end up being well below the wealth tax thresholds ?

Or within the tax rules is there an element of "add everything up and if it looks like you're going to be liable for the wealth tax, only then are you required to disclose everything on your tax return" ?

The reason I ask is there must be some folk with all sorts of disparate assets who if they (like everybody else) are not legally required to disclose will likely say "oh, all this lot must be below the threshold so I'm not going to bother with the hassle of listing it all and calculating a total". Such an attitude may mean that they are not paying their correct taxes but without compulsory reporting by everybody there would appear to be some mitigating circumstances should they be questioned. Namely that they "did a quick calculation, it was below the threshold and oops we added it all up wrong. Sorry."

Many thanks for any reply.

Des

[El Cid]

There is no obligation to make a declaration unless your wealth exceeds the allowances and tax is due.

If you do make a declaration, you just put the total value of each asset type in one box - details are not required except for property where individual properties have to be shown with their catastral references etc.

It's not so easy now to claim something slipped your memory as you also have to declare any assets worth more than 50k on Form 720 every year, even though they add up to less than the wealth tax threshold.

Sid

[DesWalker]

Thanks Sid.

Your last point is one I hadn't appreciated. So to summarise:

- Reporting blocks of assets worth more than €50k is obligatory irrespective of whether these blocks plus other assets add up to more than €700k. Everybody must do this each year on form 720.

- For wealth tax purposes, declaring a total value of these blocks plus other assets need only be done if this total exceeds €700k. This declaration is made separately from the listing of €50k blocks discussed above.

- The housing deduction only applies to the actual value of one's home up to a maximum of €300k.

- Stuff such as a €10k family car, €2k of jewellery or a €1k wrist-watch, none of which are the trappings of great wealth, must be included when calculating the total for wealth tax purposes.

If I've got the above right then I think I'm pretty clear how it all works.

Many thanks indeed.

Des

[El Cid]

That's right.

All I would add is that non financial assets such as vehicles, art etc have to be declared for wealth tax but do not get entered on the Form 720 asset declaration.

In the case of jointly owned assets the value of the assets is split between the two owners and they both get a set of allowances.

Jointly owned assets are not split between joint owners on form 720 so a joint bank account with 50k in it would have to be declared by both owners.

Subtle differences, but important.

Sid

[Canela]

Oh dear ............ I thought you only had to complete 720 every year if an asset increased in value by 20,000 euros or more??

[El Cid]

Correct. In theory, it is an annual declaration, but only if you have added new assets or previously declared assets have increased by more than 20k.

Sid

[Canela]

Thanks Cid. Thought I was in trouble.