Spanish Wealth Tax modification for non-residents

Dec 22, 2022 | Tax Flash

The Spanish government recently announced the modification of the Wealth Tax Law when the taxpayer is an individual non-resident, and owns a real estate in Spain through a non-resident entity.

Until now, and based on the wording of the majority of the tax treaties signed with Spain, an individual non-resident, may be taxed in Spain when he/she indirectly holds an immovable property in Spain through a non-resident entity, and the immovable property represents more than 50% of the total assets.

Although the correspondent tax treaty allows the taxation for the Wealth Tax in Spain, in practice, the final and effective taxation was not possible provided that the Spanish domestic rule only regulates the taxation for those assets or rights located in the Spanish territory or when those assets can be utilized in Spain.

Considering the fact that the holding of securities in a non-resident company held by an individual non-resident, is not currently subject to taxation in the Spanish Wealth Tax, this means the impossibility to subject to taxation the ownership of a real estate located in Spain indirectly owned by the individual non-resident.

The above situation has been amended in the draft law document announced by the Spanish government that modifies the Wealth Tax Law, with the purpose the ownership of a real estate held through a non-resident entity may be taxed in Spain.

Considering there is a general exemption of EUR 700,000, the taxation for the Wealth Tax would be on general terms, when the value of the real estate is higher than this amount.

The final wording of the proposed modification will be discussed in the following weeks in the Spanish Parliament. It is also pending to decide if this modification of the Spanish Wealth Tax law will enter into force in year 2022 or in year 2023.

We will keep you duly informed on the progress of this important new regulation.


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