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In 2011, the Spanish authorities introduced a luxury tax as a temporary measure to increase state revenues during the financial crisis. But already in 2013 the tax became permanent.
Luxury items like expensive real estate, luxury cars, yachts, and art objects are taxed. The specific rate depends on the region, but on average it ranges from 0.2 to 2.5%.
In what case to pay tax, what are the benefits and how to calculate it – further about it in this article.
How the luxury tax is formed
Spain has a progressive tax rate from 0.2 to 2.5%, with the maximum value depending on the region. For example, in Valencia, the tax is paid on property worth over 600 thousand euros and the rate is 3.1%. In Madrid luxury tax is not charged, and in Andalusia since September 2022 luxury tax is canceled completely.
Rates of state tax
Luxury tax by autonomy in Spain:
- Catalunya from 0,21% до 2,75%
- Asturias: from 0,22% до 3%
- Murcia: from 0,24% до 3%
- Cantabria: from 0,24% до 3,03%
- Valencia: from 0,25% до 3,12%
- Balearic Islands: from 0,28% до 3,45%
- Extremadura: percentage from 0,3% до 3,75%
The tax rate is based on the value and type of goods. For example, there is no tax:
- Real estate - up to 700,000 euros
- Cars - up to 120,000 euros
- Yachts - up to 500,000 euros
- Artwork - up to 50,000 euros
In addition to physical items, bank deposits, stocks on stock markets, and intellectual property are also taxed.
Here is an example of a tax calculation: you have a house worth 400,000 euros and deposits in Spanish banks worth 2 million euros. In total, you have 2.4 million in assets. In this case, the calculation follows the scheme:
- According to current regulations, the taxpayer's main dwelling is not subject to luxury tax up to an amount of €300,000. Since the value of the main dwelling is €400,000, only €100,000 is taken into account in calculating the tax base
- The total assets are reduced to €2.1 million
- The tax rate will be 1.3%
- The amount of tax payments: 27,300 euros, taking into account the maximum amount paid at your rate, the tax will be 25,904 euros
To illustrate, here is another example: a couple owns a house worth 600,000 euros, they have two cars worth a total of 80,000 euros, and shares in companies worth 900,000 euros. The total amount of assets is 1,580,000 euros.
- The luxury tax is paid individually for each family member. Accordingly, the value of the joint property is divided by two, resulting in the sum of the assets of each family member - 780,000 euros
- The value of the house divided by two is 300,000 euros - not subject to tax
- Total assets are 480,000 Euros - below the taxable base and, accordingly, no luxury tax is payable
If you are a non-resident, only property located in Spain is taxed. The non-taxable base is still in effect, the single dwelling exemption is not taken into account.
Tax payment procedure
The luxury tax is paid annually as of December 31. To pay, you have to submit a tax return with a digital signature or to the tax office through a bank. The reporting period is from April 1 to June 30.
Tax benefits
Based on the individual tax base calculation, the main way to reduce payments would be to diversify assets to different family members.
By law, the luxury tax cannot exceed 60% of your total and savings tax base. You can structure your investments to reduce the tax or not be subject to it at all. To do this, consult with tax professionals or accountants who can help you optimize your assets.
It is also important to consider non-taxable assets:
- Savings or insurance private pension accounts
- Home furnishings: furniture, appliances, utensils, etc.
- Property which is directly involved in the taxpayer's business activity which brings him/her main income. For example, stocks or shares in company share capitals
- Artworks, antiques and other property officially recognised as historical heritage
- Rights to intellectual and industrial property which are not related to entrepreneurial activity
«Solidarity» — Wealth tax changes in 2023
On September 29, the Spanish Finance Minister announced a series of tax measures, some of which are already included in the draft general state budget for 2023.
Specific legislative texts have not yet been published, so here are the statements of the Minister of Finance:
- The law is temporary and will be considered in 2023 and 2024. Revision is expected at the end of 2024
- The tax will be paid by individuals with net assets (total assets minus total liabilities) of €3 million or more
- A rate of 1.7% will apply to those with net assets between 3 and 5 million euros, 2.1% to those with between 5 and 10 million euros, and 3.5% to those with more than 10 million euros
- Because autonomous regions apply the current estate tax to their residents, the amount paid for the current regional estate tax will be deducted from the new "Solidarity" wealth tax to avoid double taxation
- The government predicts that the tax will be levied on about 23,000 taxpayers, with expected revenues of about 1.5 billion euros
It is expected that the tax will extend to the assets of non-residents.
Considering changes in the legal framework, as well as differences in tax payment in different regions, we recommend contacting the tax specialists Laduchi Consult, who will help you reduce the amount of tax, conduct a restructuring and not overpay.
Please note that all materials contained on this site have been prepared for informational purposes only. This data does not constitute or replace professional financial, legal or tax advice. The information is general in nature and does not take into account your personal circumstances. Always seek professional advice from officially licensed professionals: financial advisors, accountants and lawyers.