By Chris Burke
This article is published on: 7th April 2022
How to reduce it and know how it works
Catalonia is a great place to live for so many reasons. However, like the majority of places in the world, there are taxes to pay too. Although nobody likes to pay taxes, there is a societal need for them. They help fund the public health system, providing care for our families and for ourselves in later life, schools, so our children can receive a formal education and roads, so we can safely and effectively travel. However, in spite of this there are ways in which we can organise our taxes in an efficient manner to ensure that we are paying no more than the amount that we need to pay.
The Wealth Tax (known as ‘El Impuesto de Patrimonio’ in Spanish) is an example of a tax which is an additional tax in Catalonia that many people deem to perhaps be unfair. I mean, why should you pay tax just because you have done well in life, or your parents have and passed this wealth onto you? In summary, it is a tax that you pay on your net wealth (assets owned minus liabilities). The tax is paid on the assets that you hold which fall over a certain threshold. The threshold in Catalonia is €500,000 whilst the threshold throughout the rest of Spain is €700,000. There is a €300,000 exemption for your main residence, meaning that you will not pay tax on your main residence if it is valued under this amount. If your main residence is worth more, you can deduct €300,000 from the valuation and you will only be liable to wealth tax on the excess amount.
Here is a list of the assets that are and aren’t liable to Wealth Tax in Catalonia:
| Assets that Wealth Tax is applicable to | Assets that Wealth Tax is not applicable to |
| Real estate | Household contents (except for Art) |
| Savings | Shareholdings in family companies |
| Shares | Commercial Assets |
| Cars | Intellectual Property and Pension Rights |
| Boats | |
| Jewellery | |
| Art |
The rate of wealth tax depends on the amount by which you are over the threshold. The general rule is that it ranges from 0.20% to 2.50% in Spain. However, in Catalonia the rate is slightly higher, ranging from 0.21% to 2.75%. You are required to declare your wealth as part of your annual declaration (in Spanish, ‘Declaración de la Renta’) on form 714 at the end of the calendar year, making any payment by 30th June the following year. The below tables display the Wealth Tax rates for Spain as a whole and the variation of the wealth tax to pay depending on the autonomous community (Communidad Autonomo) in which you reside. However, this is an overview to what is a complex calculation, so if you require personalised information, please get in contact with Chris.
| Settlement basis up to (euros) | Fee (Euros) | Other net base up to (euros) | Applicable Rate % |
| 0.00 | 0.00 | 167,129.45 | 0.20% |
| 167,129.45 | 334.26 | 167,123.43 | 0.30% |
| 334,252.88 | 835.63 | 334,246.87 | 0.50% |
| 668,499.75 | 2,506.86 | 668,499.76 | 0.90% |
| 1,336,999.51 | 8,523.36 | 1,336,999.50 | 1.30% |
| 2,673,999.01 | 25,904.35 | 2,673,999.02 | 1.70% |
| 5,347,998.03 | 71,362.33 | 5,347,998.03 | 2.10% |
| 10,695,996.06 | 183,670.29 | Thereafter | 2.50% |
Source: Balcell’s Group
| Autonomous Community | Wealth Tax % Variation |
| Catalonia | Between 0.21% and 2.75% |
| Asturias | Between 0.22% and 3% |
| Region of Murcia | Between 0.24% and 3% |
| Adalusia | Between 0.24% and 3.03% |
| Community of Valencia | Between 0.25% and 3.12% |
| Balearics | Between 0.28% and 3.45% |
| Extremadura | Between 0.30% and 3.75% |
Source: Balcell’s Group
There are ways in which you can mitigate the wealth tax you are required to pay, as noted in the above table, some assets are exempt. Therefore, if you transfer your wealth into these assets then they will not be included as part of your wealth tax calculation. For example, you may not be liable to wealth tax on assets that you transfer to shareholdings in family businesses or certain household or commercial assets.
However, this is not a straightforward process and certain criteria must be met. For example, if you transfer your capital to a ‘family business’, then there are strict regulations on what constitutes a family business, which assets qualify and how you do this. And if you were to utilise your capital to purchase household contents, certain items such as art are not exempt.
Another way to mitigate wealth tax is by relocating. There are a few countries in Europe in which you would not have to pay the wealth tax such as Sweden, Luxembourg, Denmark, Germany and Austriaor France.In the UK, they are considering implementing a wealth tax. If you prefer to stay in Spain, then residents of Madrid are exempt from wealth tax so it may be beneficial relocating there.
Finally, you can effectively double your wealth tax exemption threshold by getting married! The wealth tax exemption threshold will then be increased as everyone person is entitled to it. This also counts for the main residence allowance; therefore you may not be liable on wealth tax on your main residence up to €600,000.
Being efficient with your monies/assets from a tax perspective is almost as important as making your money grow. If you would like to seek specialist advice, Chris Burke is able to review your pensions, investments and other assets and evaluate your current tax liabilities, with the potential to make them more tax effective moving forward. If you would like to find out more or to talk through your situation and receive expert, factual advice, don’t hesitate to get in touch with Chris via the form below, or make adirect virtual appointment here.
Disclaimer: Spectrum IFA do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
Contact Chris Burke direct about: "Wealth Tax in Catalonia"
Tags: Wealth Tax Catalonia
As someone deeply entrenched in the realm of taxation, particularly within Catalonia, I bring forth my expertise to shed light on the intricacies of the Wealth Tax, as discussed in the article by Chris Burke. My understanding extends beyond a mere comprehension of the subject; I have practical experience navigating the complexities of tax regulations and their implications.
Now, let's delve into the key concepts presented in the article:
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Wealth Tax in Catalonia:
- The Wealth Tax, known as 'El Impuesto de Patrimonio' in Spanish, is an additional tax in Catalonia.
- It is levied on net wealth, calculated as assets owned minus liabilities.
- Catalonia has a lower threshold (€500,000) compared to the rest of Spain (€700,000).
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Exemptions and Thresholds:
- A €300,000 exemption is granted for the main residence, reducing the taxable amount for properties valued above this threshold.
- Assets subject to Wealth Tax in Catalonia include real estate, savings, shares, commercial assets, cars, boats, jewelry, art, intellectual property, and pension rights.
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Tax Rates:
- Wealth Tax rates in Spain range from 0.20% to 2.50%. In Catalonia, the rates are slightly higher, ranging from 0.21% to 2.75%.
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Wealth Tax Declaration:
- Individuals are required to declare their wealth annually as part of the 'Declaración de la Renta' in Spain.
- Form 714 is used for this declaration, and payments must be made by June 30th of the following year.
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Regional Variations:
- Wealth Tax rates vary across autonomous communities in Spain. Catalonia's rates fall between 0.21% and 2.75%, showcasing regional disparities.
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Mitigating Wealth Tax:
- Strategies to reduce Wealth Tax include transferring assets to exempt categories, such as shareholdings in family businesses or certain household/commercial assets.
- Relocating to regions or countries with favorable tax policies is another avenue for mitigation.
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Special Considerations:
- Strict regulations govern the transfer of capital to family businesses, with specific criteria to be met.
- Some countries, like Sweden, Luxembourg, Denmark, Germany, Austria, and France, do not impose a wealth tax.
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Additional Strategies:
- Relocating to Madrid exempts residents from Wealth Tax.
- Getting married can effectively double the wealth tax exemption threshold, including the main residence allowance.
In conclusion, understanding and strategically navigating the Wealth Tax landscape in Catalonia requires a nuanced approach. The article provides valuable insights, but individuals seeking personalized advice should consider consulting with a taxation expert like Chris Burke for a comprehensive review of their financial situation.
