September 2012

2013 Spanish Tax Budget 

Wealth tax for another year

Wealth tax had been effectively abolished in 2008 when the government announced a 100% credit. The credit was then removed in September 2011 as a temporary measure for two years. This meant that wealth tax would apply to assets held at 31st December 2011 and 2012, with tax payable in 2012 and 2013.

As Spain’s budget deficit targets slipped and slipped again, there was a strong possibility the tax would be extended. The 2013 budget now includes a measure for wealth tax to apply for another year ie tax payable also in 2014. This is expected to raise an extra €700 million in revenue for the government.

Wealth tax remains subject to regional reliefs, so Islas Baleares and Madrid may continue to apply the 100% tax credit, as they have done so far. Comunidad Valenciana (Valencia, Alicante and Castellón) no longer applies the credit.

Wealth tax is payable by residents (on worldwide assets) and non-residents (Spanish assets) based on assets held at 31st December each year. Residents have an individual allowance of €700,000, plus a main home allowance of €300,000. Married couples may have a combined allowance of €2 million. The rates of tax range from 0.2% to 2.5%.

The extension to this tax does not bode well for the higher income and savings taxes which are only meant to apply for 2012 and 2013.

Other tax changes

The budget includes proposals to tax gains on assets held for one year at the scale rates of income tax, rather than the fixed rates, and to abolish the deduction for investment in the main home for purchases after 1st January 2013.

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