Tax developments and highlights in 2023: Wealth tax liability for Non-residents
- 18 April 2023
- Business Consultancy
The State and Autonomous Community Tax Agency is stepping up its review and detection of non-residents holding property and assets in Spanish territory to ensure that they correctly file the Non-Resident Wealth Tax.
The most important aspects of this tax are set out below, with special mention of the new features introduced for 2022.
I. What is Non-Resident Wealth Tax?
It is the tax levied on non-residents on assets and rights that are located, may be exercised or must be fulfilled in Spanish territory (wealth in Spain).
In addition, as a new feature for 2022, non-residents are subject to this tax on the ownership of shares or stocks, whether national or foreign, at least 50% of the assets of which are directly or indirectly made up of real estate located in Spanish territory.
II. Who is obliged to file the Wealth Tax return for non-residents?
Non-residents whose tax liability is payable or when, in the absence of this circumstance, the value of their assets or rights, whether or not they are exempt from tax, calculated without taking into account the charges and encumbrances that reduce their value, or personal debts or obligations, is greater than 2,000,000 euros.
There is a minimum exemption of 700,000 euros.
III. What assets must be declared?
In general, all assets and rights that are located may be exercised or must be fulfilled in Spanish territory (assets in Spain).
Such as, for example, the ownership or usufruct of real estate located in Spanish territory, bank accounts opened in Spain and shares in Spanish companies.
IV. What exemptions apply to non-residents?
In general, the same exemptions are provided for in the Wealth Tax Law for Spanish residents.
V. What are the effects of double taxation treaties on wealth taxation?
Non-residents in Spain who live in a country with which Spain has signed a Double Taxation Avoidance Agreement will apply the rules of the Agreement, and it may be that some assets located in Spain will only be taxed in their country of residence. Where it appears that both countries have the power to levy tax, it would be for the country of residence to apply the measures to avoid double taxation. In general, bank account balances and shares are exempt in Spain and taxed in the State of residence, but there are some Conventions with special or different provisions, such as those of Germany, Argentina, Belgium, France or the United Kingdom, so the specific applicable Convention should always be consulted.
VI. What is the deadline for filing the Non-Resident Wealth Tax return? How should it be filed?
It must be filed before 30 June of each year and must be filed electronically via the Internet. The tax return form is Form 714.
VII. Are there any other aspects that are important to bear in mind?
It is important to bear in mind that non-residents who have invested in companies over which they do not have control and who have invested most of their value in real estate located in Spanish territory are also subject to Wealth Tax.
Non-residents may be subject to inspection by the state and regional tax authorities, so it is highly advisable to have a good tax and legal advice.