Wealth Tax in Spain: Rules, Rates, and Tips 2025
Introduction
In addition to local taxes (such as IBI) and income tax (IRNR), foreign property owners in Spain may be subject to wealth tax. This tax, known as "Impuesto sobre el Patrimonio" (IP), targets individuals with a high net worth. It is a critical financial matter that must be fully understood to anticipate its impact on your real estate investment.
This is an annual tax levied on net wealth. For non-residents, it applies only to assets and rights located in Spain. Its complexity stems from the fact that its rates are national, but its management is devolved to the Autonomous Communities, which can modify it significantly (as in Madrid). This guide decodes the rules, 2025 rates, and optimization strategies.
What is the Impuesto sobre el Patrimonio (Wealth Tax)?
Spanish wealth tax is an annual tax levied on the net wealth of taxpayers as of December 31st each year. It applies to all assets, from which debts can be deducted.
Here are the main assets taken into account for a non-resident:
| Asset Type | Specific Examples (in Spain) |
|---|---|
| Real Estate Assets | Primary residences, secondary homes, garages, land, commercial premises. |
| Financial Investments | Balances of Spanish bank accounts, shares in Spanish companies, life insurance... |
| Luxury Goods | Boats registered in Spain, luxury vehicles, jewelry, works of art located in Spain. |
Who is Subject to Wealth Tax?
Two main profiles are liable, but with different obligations:
- ✅ Tax Residents in Spain: They are taxed on their worldwide assets (assets in Spain + assets abroad).
- ✅ Non-residents: They are taxed only on assets and rights located within Spanish territory.
The Exemption Threshold
A general allowance (exempt base) of €700,000 applies. Therefore, a non-resident is only liable for wealth tax if their net assets in Spain exceed €700,000. Tax residents also benefit from an additional €300,000 allowance on their main residence.
Applicable Rates in 2025: The Impact of Regions
The tax is progressive and applies to the net value of assets (after the €700,000 allowance). The 2025 national rates are as follows, although they may be modified by each Autonomous Community.
| Net Taxable Base (After Allowance) | Progressive Rate (National Scale) |
|---|---|
| Up to €167,129.45 | 0.2 % |
| From €167,129.45 to €334,252.88 | 0.3 % |
| From €334,252.88 to €668,505.75 | 0.5 % |
| From €668,505.75 to €1,337,011.51 | 0.9 % |
| From €1,337,011.51 to €2,674,023.01 | 1.3 % |
| From €2,674,023.01 to €5,348,046.02 | 1.7 % |
| From €5,348,046.02 to €10,696,092.04 | 2.1 % |
| Over €10,696,092.04 | 3.5 % |
Important: The Crucial Case of Autonomous Communities
This is the most important point. Regions have the power to modify this tax.
- Madrid: Applies a 100% bonus. Simply put, wealth tax there is €0.
- Andalusia: Also applies a 100% bonus.
- Valencian Community & Catalonia: Apply the tax (sometimes with their own rates and allowances) and it is therefore due.
For a non-resident, the law stipulates that the state's rates apply, *unless* the region where the majority of their assets are located has less favorable rates, in which case those rates prevail.
How is it Calculated?
The calculation is based on the net value of assets as of December 31st.
Calculation Steps
- Add the value of real estate assets (the highest value between cadastral value, tax value, and purchase price).
- Add balances of financial investments, shares, etc.
- Include luxury goods (boats, works of art...).
- Deduct debts (the outstanding capital of mortgage loans, credits...).
The result is net wealth. The €700,000 allowance is then applied to obtain the taxable base.
Calculation Example for a Non-Resident
A non-resident owns the following assets in Spain (in the Valencian Community):
- A villa with a tax value of: €1,200,000
- A Spanish bank account with: €50,000
- An outstanding mortgage loan of: - €200,000
Gross assets in Spain: 1,200,000 + 50,000 = €1,250,000
Net assets (after loan deduction): 1,250,000 - 200,000 = €1,050,000
General allowance: - €700,000
Taxable base (net): €350,000
Tax calculation (according to national rates):
(€167,129.45 x 0.2%) + (€167,123.43 x 0.3%) + (€15,747.12 x 0.5%) = €334.26 + €501.37 + €78.74 = Approx. total tax €914.37.
Declaration (Modelo 714) and Optimization
Declaration and Payment
Wealth tax is declared via Modelo 714 to the Spanish tax authorities. The declaration must be made annually (generally between April and June for the previous year). Non-residents typically need to use a tax representative in Spain to complete this complex process.
Official Resource
For any official information on Wealth Tax, consult the Spanish tax authority's portal, the Agencia Tributaria.
Optimizing Your Tax Position
There are several legal ways to reduce the impact of wealth tax:
- Choose your location: Buying a luxury property in Madrid or Andalusia is more tax-advantageous (total exemption) than in the Valencian Community or the Balearic Islands.
- Utilize debt: Ensure that loans (such as a mortgage) are properly structured to be deductible from the asset's value.
- Estate planning: Use appropriate legal structures (consultation with a tax lawyer is essential).
Conclusion
Wealth tax in Spain is a reality for high-net-worth individuals, but it should not be a deterrent. Its complexity primarily stems from the differences between Autonomous Communities, with Madrid and Andalusia having completely abolished it.
For an investment in a luxury property, it is essential to conduct a tax simulation before purchase. An expert can help you calculate the real impact and optimize your tax position to secure and maximize the profitability of your real estate investment in Spain.
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Article Summary
- Introduction
- What is the Impuesto sobre el Patrimonio (Wealth Tax)?
- Who is Subject to Wealth Tax?
- Applicable Rates in 2025: The Impact of Regions
- How is it Calculated?
- Calculation Steps
- Calculation Example for a Non-Resident
- Declaration (Modelo 714) and Optimization
- Declaration and Payment
- Optimizing Your Tax Position (Tips)
- Conclusion
FAQ: Spain's Wealth Tax (Impuesto sobre el Patrimonio)
Our tax experts answer your questions on the 2025 rates, exemptions (Madrid, Andalusia), and calculations for non-residents.
The « Impuesto sobre el Patrimonio » (IP) is an annual tax levied on the net wealth (i.e., your assets minus your liabilities) held by a taxpayer as of December 31st each year.
Yes, but only on assets and rights you own within Spanish territory. This includes your real estate properties, Spanish bank accounts, or even boats. This differs from Spanish tax residents, who are taxed on their worldwide wealth.
No, probably not. You are only liable for this tax if your net wealth in Spain (after deducting liabilities) exceeds the general allowance of €700,000. If your net wealth is below this threshold, you will not have to pay any tax.
No, it applies to your NET wealth. If you purchase a villa for €1,000,000 with a mortgage where the outstanding capital is €400,000, your net wealth for this property is only €600,000. You would therefore be below the tax threshold.
Yes, absolutely. The outstanding capital of your mortgage loan (or other credit linked to the asset) is considered a liability and is deducted from the value of your assets to calculate your net wealth.
That's correct. The Community of Madrid applies a 100% tax relief on this tax. In practice, even if your wealth exceeds the threshold, the final tax payable is €0. Andalusia also applies the same exemption.
Regions highly popular with international investors, such as the Valencian Community (Alicante, Valencia) and Catalonia (Barcelona), do not have this exemption and apply the tax (sometimes with their own specific rates). The choice of location is therefore crucial for tax optimization.
Yes. If the property is purchased under joint ownership (50/50), each spouse owns their share. Each individual benefits from the €700,000 allowance. A couple can therefore hold up to €1,400,000 of net wealth in Spain without paying this tax.
For a non-resident, the tax authorities consider all assets in Spain:
-
Balances in your Spanish bank accounts.
-
Shares in Spanish companies.
-
Life insurance policies taken out in Spain.
-
Luxury goods (boats registered in Spain, works of art, vehicles) physically located in Spain.
The authorities take the highest value among three options: the purchase price (acquisition value), the cadastral value (valor catastral), or the new reference tax value.
Certainly. Let's take a non-resident (in the Valencian Community):
-
Assets: Villa (value €1.2M) + Bank account (€50,000) = €1,250,000
-
Liabilities: Mortgage loan (outstanding capital) = - €200,000
-
Net Wealth: €1,050,000
-
Allowance: - €700,000
-
Taxable Base: €350,000 The tax will be calculated (according to a progressive scale) on this €350,000.
It's a progressive scale with bands, similar to income tax. The national scale starts at 0.2% (on the first band of the taxable base) and can go up to 3.5% for wealth exceeding €10 million.
The declaration is made annually (usually between April and June) via tax form "Modelo 714".
It is highly recommended for a non-resident. The declaration is complex and must be submitted electronically. A gestor or a tax lawyer will ensure your assets are correctly valued and your liabilities deducted.
There are two main strategies:
-
Geographical: Invest in luxury properties in Madrid or Andalusia to benefit from the 100% exemption.
-
Financial: Utilise debt (contracting a mortgage loan) for the acquisition, as the outstanding capital legally reduces your taxable net wealth.
