There are so many attractions and advantages to living in Las Islas Baleares. However, some expatriates find the tax burden in Spain quite high, especially if they are liable to wealth tax on top of income tax.
Wealth tax returns need to be submitted by the end of June 2016, for assets held at 31st December 2015. Married partners need to make separate returns reflecting their share of any joint assets and liabilities in addition to any personal items. If you are unhappy with your wealth tax liability now is the time to seek advice to see what you can do to reduce your tax bill next year.
Wealth tax rules
Wealth tax is an annual tax, payable on the total value of your taxable assets as at 31st December. If you are a Spanish resident you are liable to wealth tax on your worldwide assets. Non-residents are only liable to wealth tax on assets located in Spain.
In general, under state rules each resident individual has a tax free allowance of €700,000 plus a €300,000 allowance on his main home. Non-residents receive the individual allowance of €700,000, but no allowance against their Spanish property.
The progressive state tax rates range from 0.2% for assets up to €167,129, to 2.5% on assets over €10,695,996.
However, the local autonomous communities can amend the allowances and rates, and here in the Balearic Islands our wealth tax rates are higher than the state ones, ranging from 0.28% to 3.45%. Last year the individual deduction had been increased to €800,000 but with effect from January 2016 it is back down to €700,000.
The tax is payable on the value of most of your assets, such as real estate, savings and investments, jewellery, art, cars, boats etc.
Some assets are exempt from wealth tax, for example household contents (excluding jewels, fur coats, art and antiques) and pension rights (but not purchased annuities). Loans are deductible in calculating your net taxable wealth provided they were not used to buy or invest in assets exempt from Spanish wealth tax.
Limiting wealth tax
While wealth tax is an unpopular tax, there is some good news.
For a start, your cumulative wealth and income taxes cannot exceed 60% of the ‘general and savings taxable income bases’ of residents (but still excluding from savings income any gains on assets held for more than one year, and the associated tax rates). This is subject to paying a minimum of 20% of the full wealth tax calculation.
However, this liability cannot be reduced at all on assets that do not produce an income.
There may be other steps you can take to reduce a wealth tax liability, or eliminate it completely, particularly on your investment assets. Seek specialist advice on how to re-structure your investments – you need solutions that are personalised for your situation and objectives.
If wealth tax, or other Spanish taxes, are a concern for you, contact the Spanish tax specialists at Blevins Franks. They would review your tax planning and how you own your assets, to see if you can use Spanish compliant arrangements to lower your tax liabilities. Blevins Franks has decades of experience advising expatriates in Spain, and is equipped with in-depth knowledge of Spanish taxation, specialising in reducing tax on invested capital, pensions, wealth and inheritance.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon Blevins Franks’ understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.
For more information and personalised advice, contact Blevins Franks on +34 971 719 181.
To keep in touch with the latest developments in the offshore world, check out the latest news on Blevins Franks Tax & Wealth Management Specialists.
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This article was written on the 14h of June, 2016.