Spain Wealth Tax Non Residents?
- Víctormanuel Paz
The Spanish tax regulations state that cumulative wealth and income taxes cannot exceed 60% of a resident’s total taxable income ( there is no limit for non-residents ), subject to a minimum of 20% of the wealth tax calculation.
What is Modelo 720 in Spain?
The infamous Modelo 720 (tax form) is Spain’s worldwide asset reporting requirement for all Spanish residents with assets worth €50,000 or more held abroad, which has a disproportionate impact of foreigners living in Spain. With massive fines for failing to report, or even making innocent mistakes in the declaration, all foreigners living in Spain with assets abroad need to take the Modelo 720 tax form very seriously.
Marbella-based Larraín Nesbitt Abogados (LNA) has over 19 years’ taxation & conveyancing experience at your service. We offer a wide range of 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.
Article copyrighted © 2022 Plagiarism will be criminally prosecuted. By Raymundo Larraín Nesbitt Director of Larraín Nesbitt Abogados 8 th of January 2022 In 2013 the Spanish Tax Office implemented a new tax obligation whereby all tax residents in Spain, who hold over €50,000 in assets abroad, need to complete this tax return before end of March 2022 deadline.
- By 2018, over 5,000 taxpayers had already been (heavily) fined on failing to disclose they held substantial assets abroad;
- This figure continues to increase year on year;
- We stress the fines for non-compliance are the steepest we’ve ever seen;
In fact, so much so, they have been challenged at Brussels. The infamous modelo 720 , despite being the object of heated controversy, remains very much an active tax obligation with which taxpayers must contend with. If you fall within its scope, I strongly advise you to comply or else face the risk of stiff fines.
It should be stated this tax form is only for reporting purposes; you do NOT pay any tax on submitting it. Resident taxpayers already pay income tax on submitting their annual I. tax returns once a year. I have structured my article as a FAQ for ease of comprehension.
Who needs to declare? All Spanish tax residents who own assets overseas on or over €50,000. Again, and for the avoidance of doubt, if you are non-resident in Spain you do NOT need to submit this tax return; it is only for residents. Who is considered tax resident in Spain? The Spanish Tax Office applies – amongst many others – the following broad criteria:
- You spend more than 183 days within a calendar year in Spanish territory.
- Your centre of financial interests is located in Spain.
- Your spouse and/or underage children live in Spain.
Reporting categories There are three reporting categories: bank accounts, investments and immovable property. Obligation to report You must report all assets in a particular category if the value of your total assets within it exceeds €50,000. 2021 tax submission period From the 1 st of January until the 31 st of March 2022. Can I file it after the submission period? Yes, but hefty penalties apply. If you have already filed tax form 720 in the past You only need to file it again if:
- The value of an existing asset grew by more than €20,000, or
- You sold an asset, or
- You obtained a new asset.
Penalties for non-compliance The disproportionate fines levied are (very) stiff.
- Failing to file 720 or filing it incorrectly: €5,000 per infraction.
- Minimum fine of €10,000 for each group of assets.
- Penalty of 150% on unpaid income tax.
The Common Reporting Standard and you Please take good note that with the advent of the Common Reporting Standard (CRS), signed by over 100 countries to combat tax evasion, as from the 1 st of January 2018, the Spanish Tax Office is being spoon-fed fiscal information by your home tax office. For example, both HM Revenue & Customs and Ireland’s Revenue Commissioners are busy supplying the Spanish Tax Office with detailed information (and vice versa) on all your overseas assets and reported income derived abroad as from the 1 st of January 2018.
Ask us. In plain English, your home country’s tax office will likely have already informed the Spanish Tax Office of the assets you hold abroad. It is in your best interests to be pro-active and come clean before you are served with a legal notice imposing humongous fines on you; as it’s happened already to over 6,000 unsuspecting taxpayers.
The tax office likes waiting till the last moment before imposing fines to rake in as much interest as is legally admissible before the statute of limitations kicks in. Fines on non-compliance start at five figures and often are six-figures, or higher. Brexit and obtaining Spanish residency Scores of UK nationals applied for a Spanish residency permit in the run up to Brexit.
- Unbeknownst to them, many will be now regarded as tax residents in Spain;
- Any UK national who is tax resident, and holds over 50,000 euros in assets abroad, must file tax form 720;
- If you want peace of mind, you should sort out your tax affairs and submit this tax return to avoid humongous fines;
The last word We strongly advise you to submit tax form 720 if you are (tax) resident in Spain to avoid steep penalties. If you plan to submit it, please contact us well ahead of the submission deadline ( 31 st of March 2022 ) as it takes over a week to prepare and process.
- If you are unsure if you qualify for it, just give us a buzz and one of our friendly staff will answer your queries to allay your fears;
- Larraín Nesbitt Lawyer’s taxation service: Larraín Nesbitt Lawyers, small on fees, big on service;
Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyancing, inheritance, and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at [email protected] com , by telephone on (+34) 952 19 22 88 or by completing our contact form to book an appointment. Related tax articles
- Tax form 720 – 20th April 2018
- Tax form 720 – 21st March 2019
- Spanish Tax Office to fine 5,000 taxpayers over tax form 720 – 1st September 2019
- Tax form 720 – Modelo 720 – 21st of February 2020
- Modelo 720 – Tax form 720 – 8th of January 2021
Article also published at Larraín Nesbitt Abogados : Modelo 720 – Tax form 720 Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV. 018, 2. 019, 2. 020, 2. 021, and 2.
What is the wealth tax in Andalucia?
Wealth Tax – Impuestos sobre el Patrimonio – Spain is the only country in the EU that applies a wealth tax. The Impuesto sobre el Patrimonio affects anyone with assets over €700,000 (around 200,000 people in Spain) and these tax residents must declare any relevant properties, savings or current accounts, investments, life insurances, jewellery, vehicles, art, concessions or similar. Above €700,000 the wealth tax rates are as follows:
|Tax base||Tax %|
Andalucia has also increased tax-free allowances to €1,250,000 and €1,500,000 for someone with a disability, depending on severity. This puts Andalucia as among the 9 autonomous communities in Spain with the lowest wealth tax, according to property portal Idealista. However, it hasn’t gone as far as Madrid, the only region to scrap the impuesto sobre el patrimonio completely.
How is wealth tax calculated on property?
Frequently Asked Questions – What is an example of wealth tax? Following is an example of wealth tax. The wealth tax is calculated at 1% on net wealth above ₹30 lakh. If your net wealth for the financial year is ₹50 lakh, 1% wealth tax will be charged on ₹20 lakhs.
(₹50 lakhs – ₹30 lakhs exemption = ₹20 lakhs) So, the final amount payable will be ₹20,000/- as its 1% on ₹30 lakh. Is wealth tax abolished? Yes, the Wealth Tax Act was abolished in 2015 Union Budget by the finance minister, Mr.
Arun Jaitley. How is wealth tax calculated? All individuals and Hindu Undivided Family with net wealth above ₹30 lakh were required to pay wealth tax. This means that if the total net wealth of an individual, HUF or company exceeds ₹30 lakhs, on the valuation date, a tax of 1% will be levied on the amount in excess of ₹30 lakhs.
Who were liable to pay wealth tax? All individuals and Hindu Undivided Family with net wealth above ₹30 lakh were required to pay wealth tax. Where should taxpayers furnish all the particulars which were hitherto submitted in wealth tax returns? Including all details about assets, wealth held will be listed in the income tax returns.
Income Tax authorities will administer the proposed law. What was the main reason cited by the finance minister to abolish the wealth tax? As per Mr. Arun Jaitley, the finance minister, wealth tax had high collection costs but a low yield. Experts, on the other hand, suggest a variety of reasons behind the move including streamlining of data, reining in black money and minimising tax evasion among others. .
How are investments taxed in Spain?
Spanish taxes for non-residents – The general flat income tax rate for non-residents is 24%, or 19% if you are a citizen of a country in the European Union or the European Economic Area. Other income is subject to Spanish non-resident taxes at the following rates:
- Capital gains resulting from transferred assets are taxed at a rate of 19%.
- Investment interest and dividends are taxed at 19%, although are typically lower through double taxation agreements. Interest tax is exempt for EU citizens.
- Royalties are taxed at 24%.
- Pensions are taxed at progressive rates, from 8% to 40%.
To apply to pay income tax as a non-resident of Spain, first obtain Modelo 149. Next, use the Modelo 150 form to make your income tax declaration. If you are a non-resident property owner, you should make your tax declaration on Modelo 210.