Wealth tax in Spain: the thresholds that apply

It affects fewer foreign owners than they fear and more than they expect, because the deciding number is not the price paid but which of 3 valuations is highest.

Who is liable

Non-residents are taxed only on assets situated in Spain, principally property, Spanish bank balances and Spanish securities. Tax residents are taxed on worldwide assets. Each individual is a separate taxpayer, so a couple owning a property 50 % each each has their own allowance, which effectively doubles the household threshold before any tax arises.

The valuation trap

Property is not entered at market value. It is entered at the highest of the cadastral value, the value at which it was acquired, and the value assessed by the administration. For a property bought recently, the acquisition value usually wins and is close to market. For one bought decades ago, the cadastral value may govern and can be far lower, which is why 2 similar houses on the same street can produce very different wealth tax positions.

The effect of a mortgage

Debt secured on the Spanish property reduces the taxable base by its outstanding balance. A property valued at 1,200,000 € with a mortgage of 600,000 € contributes 600,000 € to the base, which for a single owner sits below the 700,000 € allowance. That is a real planning consideration for buyers who could pay cash but are weighing whether to borrow.

The reduction applies to the balance outstanding at 31 December, so the position changes as the loan amortises.

The solidarity tax

A separate state level tax applies to larger net wealth above a higher threshold, with a credit for wealth tax already paid so the same wealth is not taxed twice. Its practical effect is that regional reductions to wealth tax do not remove the liability for those above the higher threshold. Anyone whose Spanish assets approach these figures should take advice before completion rather than after the first return falls due.