Net Wealth Tax – Do not forget to check if you are required to file a tax return

Summary:

Tax resident, non tax resident and individuals under the Special Tax Regime, will have to check whether or not they have a Net Wealth Tax Return to file.

Net Wealth Tax – Do not forget to check if you are required to file a tax return

We are in the middle of the Spanish Tax Season and many of our clients overlook analysing whether or not they may be obliged to file a Net Wealth Tax Return.

Why? Perhaps, the Net Wealth Tax is usually seen as an obligation for those people consider high worth individuals. But the truth is that, apart from the value of the wealth there are other elements that will impact on the Net Wealth Tax obligation.

Net Wealth Tax obligation

In the first place, the consideration as Spanish Tax Resident or non-tax resident, will imply the obligation for Net Wealth Tax purposes either in respect to the worldwide wealth (no matter where is located) or only in respect of the wealth located in Spain.

Secondly, it is important to indicate that even when the Net Wealth Tax applies in the entire Spanish Territory, each Region has the right to approve their own regulations around this tax and consequently, the individual’s obligation will be different depending on where his/her residence is located within Spain.

In general terms, we would anticipate that non-tax resident individuals and those who have been granted with the Special Tax Regime in Spain (so called Beckham Law) will have a filing obligation when the total value of the Net Wealth located in Spain is greater than €700.000.

Despite the above, it is important to take into account that non-tax residents may have different options at the time of filing the tax return, depending on when was the first year of non-residence in Spain, or if they are resident in an EU county, etc.

In respect if individuals who are tax resident of Spain, depending on the Region of residence, different regulations can apply in respect of the exempt limits, progressive tax rates, and deductions or bonifications may vary. In the absence of specific regulation State Law will apply.

For example, the following Regions have regulated exempt limits other than the general of € 700.000:

  • Aragón: € 400.000
  • Cataluña: € 500.000
  • Extremadura: € 500.000
  • Comunidad Valenciana: € 600.000

Another example is the Region of Madrid, that has established a full bonification of 100% of the tax due.

In any case, a Net Wealth Tax Obligation will arise when the total gross value of the assets exceeds € 2.000.000.

Don’t forget to check this issue! The deadline is June 30th!

Should you have any questions, we would be more than happy to assist (info@albeatax.com).

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