The Spanish government has recently introduced a Solitary Tax for Great Fortunes (ISGF). You may have heard it referred to as the ‘Spain’s Millionaire Tax’. It comes into play from January 2023 and will be applicable on tax declarations made in 2023 and 2024 for the previous tax year.
Expatra asked Sam Daynes of Holborn Assets to comment on the new tax and how it affects expats living in Spain.
Does the Solidarity Tax replace the exciting Wealth Tax?
The Solidarity Tax is designed to supplement the current Wealth Tax and, as such, is not designed to be a replacement. The Wealth Tax is a regional tax. Some regions, such as Andalucía and Madrid, don’t charge it. The Solidarity Tax, however, is nationwide, and every region is affected by this new tax.
The new Solidarity Wealth Tax is an individual tax levied across the whole country and is not different depending on a person’s region.
The tax affects people whose taxable base exceeds 3 million EUR. This will be a progressive scale. All rates, exemptions and rules are based on the Wealth Tax Law.
There are exemptions when calculating your taxable base and ways to structure your finances to protect you from ISGF potentially.
Does the new Solidarity Wealth Tax in Spain affect residents, non-residents or both?
As a Spanish resident, you will pay the Solidarity Tax on your entire worldwide wealth. With regards to non-residents, the tax is payable on any wealth that is located in Spain.
For Spanish residents, there are ample tax allowance benefits.
Is this tax permanent or just temporary?
The tax was introduced as a temporary measure to raise additional revenue for the current fuel crisis and high inflation. Its initial scope is to cover the 2022 and 2023 tax years. As this measure is designed to raise additional revenue, it is hard to say whether this will remain temporary. Taxes have previously been brought in temporarily and have then become permanent. My view is that this will be here to stay past the initial proposed period.
What are the rates of the new Solidarity Wealth Tax in Spain?
The rates for the new solidarity tax are as follows:
- 0% for the first 3 million EUR NET worth
- 1.7% of NET worth between 3 million EUR and 5 million EUR
- 2.1% of NET worth between 5 million EUR and 10 million EUR
- 3.5% of NET worth above 10 million EUR
Are there ways to reduce the Solidarity Tax?
There are certainly ways that you can lawfully reduce the tax. It is prudent to seek financial advice to find the best way to do this.
Certain deductions can be made to lower the taxable amount. As mentioned earlier in this article, these deductions can include:
- Certain types of investments. By correctly structuring your finances, you can look to reduce your liability. There are investments available that can help you do this.
- Household goods. Any household items do not get included in wealth tax calculations.
- Artwork
- Family-run businesses.
- Property (up to a maximum of 300,000 EUR
- Intellectual and industrial property rights
- Economic rights
- Spanish historical heritage assets
Expats living in Spain who feel they may be affected by the Wealth or Solidarity Tax should seek financial advice. The difference that the correct structuring of your finances could make can be considerable.
We are offering a free financial review exclusively to Expatra readers and can provide help with this and all areas of finance. Please, book your free consultation here.
The Content is for informational purposes only; you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing in this report constitutes a solicitation, recommendation, endorsement, or offer by HOLBORN or any third-party service provider to buy or sell securities or other financial instruments in this or any other jurisdiction.
Read our Taxes In Spain guide to understand your total tax liabilities in Spain.
