- 1 December, 2022
- Category: Businesses, Companies, Laboral, SFAI Network, Tax
This tax will affect those fortunes that exceed 3 million euros. And it establishes several brackets depending on the net worth:
– The first bracket will be 1.7% for wealth between 3 and 5.34 million euros.
– The second bracket is 2.1% and affects the range between 5.34 and 10.69 million.
– 10.69 million, a rate of 3.5% will be applied.
This new tax will affect not only residents, but also non-residents in our country. Thus, not only the residents in Spain will be taxed by personal obligation, for all their world-wide patrimony, but also the non-residents. The latter will be taxed by real obligation, in relation to the goods and rights of which they are owners, and which are located in our country. In addition, these non-resident taxpayers will not be able to reduce the taxable base by the minimum exemption foreseen in the Wealth Tax. And this, because this benefit is only foreseen for the taxpayers who pay taxes by personal obligation.
What taxes do non-resident foreigners who buy a property in Spain have to pay?
When a non-resident foreigner buys a house in our country, he must pay the price of the house and other compulsory expenses, such as the appraisal of the property or the taxes levied on this transfer. But also to the following taxes:
1. IRNR (Non-Resident Income Tax).
When a non-resident for tax purposes in Spain is the owner of a property in Spain, he/she must also pay his/her taxes by filing the corresponding forms individually or through a representative in Spain.
The value determined is that 1.1% of the cadastral value of the property owned is imputed to the IRNR taxable base.
Example: If the property has a market value of 5 million euros and the cadastral value of 2.5 million euros, it has to take to the taxable base 27,500 euros and pay a tax rate of 19% if residing in the EU or certain States or 24%, if the maximum tax rate is 6,600 euros per year.
2. Tax on large fortunes
This tax establishes several brackets depending on the wealth, ranging from 1.7% to 3.5%, and it should be noted that non-resident foreigners will not enjoy the exemption of the first 700,000 euros that residents do have. Thus, if it finally comes into force, the non-resident foreigner who buys a villa of 5 million Euros will pay 34,000 Euros in concept of this new tax that will be paid when buying properties with a value of more than 3 million Euros.
Example: owning a house in Spain worth 5 million euros, for a non-resident individual, would mean paying about 40,600 euros per year (34,000 + 6,600 euros).
3. VAT on new housing
The tax levied on this property is VAT at 10%. Therefore, in a house of 5 million euros, the tax will be 500,000 euros. This tax will be paid if the property purchased is new.
4. ITP on used housing
The tax levied on this type of property is the Property Transfer Tax (ITP) and varies depending on the Autonomous Community, but it ranges between 5% and 10% of the deeded price (between 250,000 and 500,000 euros for the above example). This tax will be paid when the property is second hand.
5. AJD
Both the purchase of new and used houses, if it is done by means of a mortgage, are subject to the payment of another tax which is the Stamp Duty (AJD) which is about 1% of the deeded price of the sale.
6. IBI (Real Estate Tax)
This is a tax that must be paid by those individuals or legal entities that own the property on January 1 of the current year. This tax is levied on the value of the real estate. It is a municipal tax that must be paid to the Town Hall where the property is located. The amount of the IBI is calculated on the cadastral value of the property being the percentage and, therefore, the amount of the tax to pay different depending on the Town hall where the property is located and the personal situation of the holder of the property.
What happens to non-residents who are indirect owners of real estate in Spain?
The Directorate General of Taxes (DGT) has confirmed that the holding of shares or participations in companies by non-residents, who own directly or indirectly real estate investments in Spain, does not generate taxation in Spain for Wealth Tax (IP).
This has been established in binding resolution number V1947-22, which affects non-resident individuals who own real estate in Spain indirectly, i.e., through foreign entities.
However, “the Wealth Tax will be modified in order to subject to taxation in Spain the holding of shares in companies 50% of whose assets are made up of real estate located in Spain”.
Cristina Díaz
Head of International Mobility
JDA/SPAIN