What is Wealth Tax?
The Wealth Tax (Impuesto sobre el Patrimonio - IP) is a tax levied on the net wealth of individuals as of December 31st of each year. Unlike Personal Income Tax (IRPF), which focuses on annual income, Wealth Tax is based on the total value of your assets and rights.
It is a state tax ceded to the Autonomous Communities, leading to significant differences in final taxation depending on where you reside, as each region can modify the tax-free allowance, rates, and rebates.
Who is Liable for Wealth Tax?
The filing obligation depends on your tax residency status:
- Spanish Tax Residents: Taxed under a personal obligation (worldwide wealth), including assets in Spain and abroad.
- Non-Resident Taxpayers: Taxed under a real obligation, only on assets and rights they own in Spanish territory.
What Assets Form Part of Your Wealth?
The net value of your assets must be calculated by subtracting deductible debts. The most common assets to declare are:
Real Estate
Properties, commercial premises, land, etc.
Financial Assets
Bank accounts, deposits, stocks, investment funds.
Other Assets
Vehicles, boats, jewelry, and art.
Key Tax Exemptions
Certain assets are not included in the tax calculation, the most important being:
- Main residence (Vivienda habitual): Exempt up to a maximum of €300,000.
- Business and professional assets: Assets required to carry out an economic activity, under certain conditions.
- Pension plans and other retirement savings schemes.
How is the Tax Calculated?
- Net Wealth Calculation: Sum the values of all assets and subtract deductible debts.
- Taxable Base: Subtract exemptions (e.g., main residence) from the net wealth.
- Liquid-able Base: Apply the tax-free allowance. At the state level, this is €700,000, but each region can modify it.
- Gross Tax Liability: A progressive rate is applied to the liquid-able base (state level: from 0.2% to 3.5%).
The Solidarity Tax on Large Fortunes (ISGF)
This state tax acts as a minimum tax floor for net wealth exceeding €3.7 million. The amount paid for Wealth Tax is deducted from the ISGF liability, avoiding double taxation.
Who is Obliged to File Form 714?
You must file the return if your tax liability **results in a payment due**, or if the gross value of your assets (before debts) **exceeds €2,000,000**.
The filing period coincides with the Personal Income Tax campaign, usually between April and June.