Taxation of Non-Residents in Spanish Wealth Tax – Deductibility of Loans for Real Estate Acquisition

Jun 4, 2024 | Tax Flash

The General Directorate of Taxes (DGT) has admitted, in its binding consultation V0010-24 dated 13 February 2024, that a loan granted to non-tax resident individuals in Spain to acquire a property in Mallorca is deductible in their Wealth Tax, even if said loan comes from an English financial institution.

In the analysed case, the non-tax resident individual acquired a property located in Mallorca financing the operation with a personal loan from a Spanish bank, and is considering refinancing this loan with a personal loan from an English bank since they offer more favourable conditions.

Thus, the DGT concludes that, to the extent that the first loan was deductible due to its purpose (the acquisition of a real estate located in Spain) and provided this is evidenced by any valid means in law, the new loan will also be deductible for the same reason. This conclusion would be applicable regardless of the type of loan granted by the financial institution, as it would ultimately have been dedicated to financing the acquisition of the property in Spain.

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