What is Spain’s new solidarity tax?
As a real estate agent in Sotogrande, I find that my clients most concerning element in the decision-making process of whether to buy, or not to buy in Spain, is the fiscal position they will find themselves in once a resident, or and indeed as a nonresident property owner.
Specific to Andalucía and therefore Sotogrande, the wealth tax as applied to property, has been a big concern. Thus, the recent abolishment of the wealth tax in Andalucía by the current rightwing regional government was most welcome by those with property valued over €700.000.
However, due to the current cost-of-living crisis the Spanish central government looked for some short-term measures to generate more revenue. A tax on large fortunes was imposed on residents with significant wealth. This tax is called the Solidarity Tax. (Impuesto de Solidaridad a las Grandes Fortunas’)
The tax is theoretically a short-term levy, apparently for two years, and is an additional tax to the wealth tax. However, you will not pay two times.
The Solidarity tax law was passed on the 27th of December 2022. It is meant to be temporary, but no end date is confirmed. As it is a central government tax the autonomous regions or regional governments cannot modify it, so to some extent negates the recent abolishment of the wealth tax.
Who is liable for Spain’s solidarity tax?
- The tax applies to Spanish tax residents with net wealth above three million euros. Note this is on the individuals worldwide assets.
- Those who are not Spanish residents but have assets in Spain, will be taxed only on their Spanish assets and only assets over three million.
The tax applies for Spanish tax years, which are calendar years so 2022 and 2023. What happens thereafter is not clear, but we should anticipate some sort of review. The first payment will therefore be due in the second quarter of 2023 (April to June) for year 2022.
Are there any allowances and exemptions to the Solidarity tax?
Spain’s solidarity tax works in the same way as the regular wealth tax. Spanish tax residents are exempt on the first €700,000, and those owning a property have an additional €300,000 from the net value of the main home.
What are the Solidarity tax rates?
Solidarity TAX in Spain – Chart of solidarity tax rates example – © Noll Sotogrande Real Estate
Assets are valued in the same way as the wealth tax was calculated.
In the case of a property, it is based on the higher of certain values as follows:
- the cadastral value
- the value established by the tax authorities in a tax audit or another tax procedure
- the acquisition price
- the reference value of the cadastre.
So, in conclusion, the purpose of this new tax is to generate more revenue from taxpayers with large fortunes and an ability to help the government manage the energy and inflationary crisis caused by Covid and the Ukraine war and help less wealthy cope with the current high cost of living. Most people will not be affected.
As the name implies – ‘impuesto de solidaridad a las grandes fortunas’ or ‘solidarity tax on large fortunes’ – is only imposed on very wealthy individuals and most people will not be affected.
Charlie Gubbins
E-Mail: charles.gubbins@noll-sotogrande.com
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Charles Gubbins and Stephanie Noll – Sotogrande Real Estate Experts |
*Disclaimer: Please note the material contained in this guide is for informational purposes only. This information is general in nature and has not taken into consideration your specific personal circumstances.
