How investment capital and income is taxed in Spain – Part 2

Wealth taxes

In Spain, your total worldwide assets are subject to the wealth tax rules and potentially solidarity tax.
Under state rules, each individual receives a €700,000 allowance, plus €300,000 on the main home. The Regions can vary the allowances and rates and the Balearics increased the individual deduction to €3,000,000 from 2024. Tax rates then reach up to 3.45% for wealth exceeding 10,909,915.
Solidarity tax applies the same principles but only to wealth above €3,000,000. You get the state allowances, so effectively it only impacts wealth above €4,000,000. This cannot be varied by regional rules. You only pay one of these wealth taxes, whichever is higher.

Cryptocurrencies

If you transfer or sell cryptocurrency, any gains would be subject to Spanish capital gains tax at savings income rates ranging from 19% up to 28%. You also need to include the value of your cryptocurrency in your wealth tax return.

Exit tax

If you have a large investment portfolio and leave Spain to live elsewhere, you may have to pay Spanish tax on unrealised capital gains arising from your holdings in all types of companies and collective investment institutions.

This applies if you have been Spanish tax resident for 10 out of the 15 preceding years, if the market value of the shares surpasses €4,000,000 or the shareholdings exceed 25% and the shares market value exceeds €1,000,000.

The ‘Beckham Law’

If you are eligible for this special tax regime for individuals who become resident in Spain through employment, you do not pay tax on non-Spanish source investment income or capital gains tax on assets outside Spain. Wealth tax liability is restricted to assets located in Spain.

Tax planning

Living in Spain is very conducive to a healthy and happy retirement but, like any country, there are some drawbacks, and a key concern here is taxation. But you don’t necessarily need to fear taxation in Spain and may find you improve your tax situation by becoming resident. The Spanish regime does present tax mitigation opportunities – the way you hold your assets and take income from them can make a significant difference to your tax bill. Take personalised advice to establish how much you could improve your tax situation in the Balearics.

Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice.
Keep up to date on the financial issues that may affect you on the Blevins Franks news page at www.blevinsfranks.com