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Wealth tax in Spain: obligations, thresholds, and how to plan around them

Spain's wealth tax applies to residents' worldwide assets and non-residents' Spanish assets above €700K. Expert planning and compliance from BMC.

Model your Spanish wealth tax exposure

The problem

Spain is one of the few developed countries that still levies an annual net wealth tax on individuals. The Impuesto sobre el Patrimonio (IP) taxes the net value of your assets — worldwide for residents, Spanish-situs assets for non-residents — above an exemption threshold that varies by autonomous community. For most of Spain the threshold is approximately 700,000 euros of net taxable assets after a 300,000-euro primary residence allowance for residents. Adding to the complexity, Spain introduced a temporary Solidarity Surcharge (Impuesto Temporal de Solidaridad de las Grandes Fortunas, ITSGF) in 2023 as a backstop for residents of communities like Madrid that had reduced IP to zero. The ITSGF applies to net assets above 3 million euros and imposes rates of 1.7% to 3.5%, regardless of which autonomous community you live in. For high-net-worth individuals, the interaction between regional IP rules and the national ITSGF requires careful modelling to determine actual liability.

Our solution

BMC provides wealth tax planning and annual compliance for both Spanish residents and non-residents with significant Spanish asset exposure. For residents, we model IP liability across different autonomous communities, identify exempt assets (particularly business ownership exemptions and primary residence), and advise on structuring that lawfully reduces the taxable base. For non-residents, we calculate Spanish-situs asset exposure and file the required returns. We also provide strategic advice for those considering relocating between autonomous communities (the Madrid exemption has historically reduced IP to zero for residents there), and we model the interaction between IP and the ITSGF solidarity tax for clients above the 3-million-euro threshold.

Process

How we do it

1

Asset mapping and valuation

We identify all assets subject to IP: Spanish and, for residents, worldwide real estate, bank accounts, investment portfolios, private equity holdings, life insurance surrender values, and personal assets. We apply the correct valuation methodology for each asset class — cadastral value for real estate, market value for listed securities, AEAT-approved methodologies for unlisted shares and business interests.

2

Exemption and deduction analysis

We apply all available exemptions, most importantly the business ownership exemption (empresa familiar), which can shelter significant wealth from IP if the structure meets the activity, ownership, and management conditions. We also apply debt deductions, the primary residence allowance for residents, and the IP/IRPF cap rule that limits combined income and wealth tax to 60% of taxable income.

3

Community selection and IP vs ITSGF modelling

For prospective residents choosing their autonomous community, we model IP liability under each community's rules and compare against the national ITSGF baseline. For existing residents, we assess whether any restructuring is appropriate. For those above 3 million euros net, we model the ITSGF liability and its interaction with any IP already paid.

4

Annual compliance and filing

We prepare and file the annual IP return (Modelo 714) by the June/July deadline alongside the IRPF return. For non-residents with Spanish assets, we file the required Modelo 714 as a separate filing. We manage all AEAT correspondence and valuations challenges.

€700K
Approximate net asset threshold before IP applies
3.5%
Top ITSGF solidarity surcharge rate above €10M
€3M
Threshold at which ITSGF solidarity tax begins

As a UK resident with substantial Spanish property holdings, I had no idea I was liable for Spanish wealth tax every year. BMC analysed my position, correctly applied the EU non-resident rights, and filed the outstanding returns. They also restructured part of my holdings through a business vehicle that qualified for the empresa familiar exemption — the planning paid for itself within the first year.

Caroline Ashworth Property investor and private client, Private client, Surrey

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Spain’s two-layer wealth tax system

Spain is unusual in maintaining both a regional wealth tax (Impuesto sobre el Patrimonio) and, since 2023, a national solidarity surcharge (Impuesto Temporal de Solidaridad de las Grandes Fortunas). Understanding how these two taxes interact is essential for anyone with significant assets in or connected to Spain.

Impuesto sobre el Patrimonio (IP) is an autonomous community tax. The national framework sets minimum rates and thresholds, but communities can modify them substantially. The national scale runs from 0.2% to 3.5% on net assets above the applicable exemption, but many communities have diverged significantly from this. The primary residence allowance is 300,000 euros for residents; the general personal exemption is 700,000 euros in most communities.

ITSGF (solidarity surcharge) operates nationally and applies exclusively to Spanish tax residents with net assets above 3 million euros. It was introduced to create a floor that prevents wealthy residents of zero-IP communities from escaping wealth tax entirely. The key mechanism is that ITSGF is calculated first, then reduced by any IP actually paid — so you pay the greater of the two, not both.

Non-residents: Spanish-situs assets only

Non-residents are subject to IP only on Spanish-situs assets — real estate located in Spain, bank accounts at Spanish institutions, shares in Spanish companies, and other assets whose legal or economic situs is Spain. Non-residents do not benefit from the primary residence allowance or regional exemptions that residents enjoy, but they do benefit from the same right to access the IP scale applicable in the autonomous community where their most valuable Spanish asset is located (following EU case law).

For a non-resident with a 1.5-million-euro Spanish property and no other Spanish assets, the taxable base is approximately 800,000 euros after the 700,000-euro personal exemption. The IP liability is modest — typically 2,000-4,000 euros depending on the applicable community rate — but non-filing creates the same penalties and surcharges as any other missed Spanish tax obligation.

The empresa familiar exemption: a significant planning tool

The most powerful IP exemption for business owners is the empresa familiar (family business) regime. Shares in qualifying closely held businesses can be 100% exempt from IP. For a business worth five or ten million euros, this exemption eliminates the single largest component of the wealth tax base.

The qualifying conditions are strict: the business must conduct genuine economic activity, one family member must actively manage it and receive remuneration representing more than 50% of their total earned income, and minimum ownership thresholds must be met. But when properly structured, the exemption is robust and well-established in Spanish tax law.

BMC advises on restructuring business ownership to meet the empresa familiar conditions as part of its broader wealth and succession planning practice.

Choosing your autonomous community: the Madrid advantage

For high-net-worth individuals planning to relocate to Spain or move between Spanish regions, the choice of autonomous community of habitual residence has a material impact on wealth tax. Historically, Madrid has applied a 100% IP bonus, while communities like the Basque Country, Catalonia, and Valencia have maintained meaningful IP rates.

However, the ITSGF solidarity surcharge means that above 3 million euros in net assets, the total wealth tax bill is now similar regardless of where you live in Spain — the ITSGF makes up for any IP not paid locally. The community choice still matters below the 3-million-euro threshold and for structuring purposes, but the dramatic advantage of Madrid residency for ultra-high-net-worth individuals has been substantially reduced.

The 60% cap: protecting income-poor, asset-rich taxpayers

Spain’s IP/IRPF cap rule is critical for taxpayers who hold significant assets but have relatively modest taxable income — retired individuals, property owners living off rentals, and those whose income is primarily capital gains taxed at the savings rate rather than general income.

The cap ensures that the combined IRPF + IP liability cannot exceed 60% of the IRPF taxable base. For someone with 5 million euros in assets but an annual income of 50,000 euros, the cap significantly limits the wealth tax payable. BMC calculates the cap benefit for every client in the relevant asset range as part of the annual IP compliance engagement.

FAQ

Frequently asked questions

Spanish tax residents are subject to IP on their worldwide net assets, assessed on 31 December each year. Non-residents are subject to IP only on Spanish-situs assets — primarily Spanish real estate, Spanish bank accounts, and shares in Spanish companies. For residents, the effective threshold after the 300,000-euro primary residence allowance and the personal allowance (typically 700,000 euros in most communities) means IP begins to bite at roughly 1 million euros in net assets for a single person owning their own home.
Madrid has historically applied a 100% bonus on IP liability for its residents, effectively abolishing the tax locally. This is why Madrid has attracted many high-net-worth individuals and why Spain introduced the ITSGF solidarity surcharge in 2023 — to prevent residents of Madrid from being entirely exempt when residents of other communities were paying. Andalucia extended a 100% IP bonus in 2022. The Basque Country and Navarra have their own foral IP regimes. The tax position changes periodically as regional governments adjust their rates and bonuses.
The Impuesto Temporal de Solidaridad de las Grandes Fortunas (ITSGF) is a national wealth tax introduced for 2023 onwards as a supplement to IP. It applies to Spanish tax residents with net assets above 3 million euros. The rates are: 1.7% on net assets from 3 to 5 million euros, 2.1% from 5 to 10 million euros, and 3.5% above 10 million euros. The ITSGF can be offset against any IP already paid in the same year — so residents of Madrid who paid zero IP under the local bonus pay the full ITSGF, while residents of communities that charge meaningful IP rates may have little or no net ITSGF liability.
Shares in a qualifying closely held business can be fully exempt from IP under the empresa familiar regime. To qualify, the business must carry on an economic activity (holding companies and investment vehicles generally do not qualify), the shareholder or a family member must actively manage it and receive remuneration for doing so that represents more than 50% of their earned income, and the shareholding must exceed 5% individually or 20% as a family group. When correctly structured, this exemption can shelter tens of millions of euros of business wealth from IP and from the wealth tax cap calculation.
Yes. The IP/IRPF cap rule provides that the combined liability for IP and IRPF (income tax) cannot exceed 60% of the taxpayer's IRPF taxable base. If the combined tax exceeds this cap, the IP liability is reduced by the excess — but the reduction cannot reduce IP below 20% of the calculated IP before the cap. For high-net-worth individuals with large asset bases but relatively modest income (retired people living off capital, for example), this cap is essential to prevent the wealth tax from consuming capital.

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