On 18th April 2008 Spain’s Council of Ministers approved a measure to abolish wealth tax from 1st January 2008. However, if you’re Spanish resident and your assets are worth more than your allowances (up to €150,253.03 for the main home plus up to €108,182.18 for all other Worldwide assets) you may still be required to file a wealth tax return.
If this is the case you will be given a 100% credit for your assessed wealth tax liability, which means that, as the rules stand at the moment, you will pay no wealth tax. It’s worth noting that wealth tax hasn’t been completely abolished since the tax credit of 100% could be reduced in the future.
For non residents, the annual tax payment made until 2008 in respect of your Spanish holiday home comprised both wealth tax and an element of non residents income tax. The wealth tax declaration no longer needs to be made, but the tax on the deemed rental income from the property will still be payable via a separate return.
The deemed income earned is equal to 2% of the property’s catastral value. Where the catastral value has been reassessed since 1st January 1994 the deemed income drops to 1.1% of the catastral value but in the absence of a catastral value the it’s deemed to be 1.1% of exactly one half of the purchase price, or the escritura value if higher.
The income tax is then calculated at the non residents rate, which is currently 24%. Residents who own a 2nd home are also charged tax on a deemed income arising from the 2nd home. The deemed income is calculated in the same way as for non residents, but the rate of tax payable will be equal to your highest marginal income tax rate.