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Both Spanish tax residents and non-residents must pay wealth tax if the value of their assets and rights exceeds the tax-free allowances. While non-residents only must pay tax on their assets in Spain (e.g. a holiday home), residents pay tax on their worldwide assets but are entitled to an additional allowance for their main residence. The allowances vary in each Spanish autonomous region, and the Valencia region has just increased them, which is good news for taxpayers.

What are the new legal developments regarding wealth tax in the Autonomous Community of Valencia?

Law 5/2025 of 30 May on tax measures of the Generalitat Valenciana amended Article 8 of Law 13/1997 of 23 December.

It has been established that the tax base for personal taxpayers will be reduced by €1,000,000 (previously €500,000) within the scope of the wealth tax allowance. This amendment will come into force for all taxable events occurring on or after 31 December 2025 (from the wealth tax return for the year 2025).

Can non-residents also benefit from the increased allowance?

Based on the literal wording of the regulation, it appears that the legislator intended to apply the increase in the allowance only to taxpayers resident in Spain who are subject to personal taxation.

The subsequent interpretation and application of the tax remains to be seen. Something similar occurred in the Balearic Islands in 2024, when the allowance for personally liable taxpayers was increased to 3 million euros. The interpretation and application of the provisions of the wealth tax and, in particular, the relationship with the state temporary solidarity tax on large fortunes, led de facto to the extension of this allowance to non-residents. We assume that this will happen in the same way in the Comunidad Valenciana.

How much is the additional allowance for the main residence (‘vivienda habitual’)?

In addition to the regular allowance, an allowance of €300,000 is provided for the main residence. This allowance only applies to taxpayers who are resident in Spain for tax purposes, as non-residents do not have a ‘main residence’ in Spain (otherwise they would be resident in Spain for tax purposes).

How is real estate valued for wealth tax purposes?

Real estate is valued at the highest of the following values:

• Cadastral value
• Value determined by the administration (as of 2022, this is the cadastral reference value)
• Acquisition value (purchase price plus taxes paid at the time of purchase, as well as notary and registration fees)

For example, if a taxpayer purchases a property that is intended to serve as his or her primary residence and it costs €500,000, only the remaining €200,000 is subject to taxation.

What are the differences between residents and non-residents?

Every natural person residing in Spain must submit a global declaration of their total assets. This means that they must pay wealth tax on their worldwide assets, regardless of where they are located.

Non-residents only have to declare wealth tax on their Spanish assets.

In addition, the specifics of double taxation agreements must be taken into account. In the case of Germany, for example, movable assets (such as a bank account) are not subject to Spanish wealth tax if the account holder is not resident in Spain.

On what date is wealth tax due?

The reference date for the assessment and taxation of wealth tax is 31 December of the respective year.

The significance of the reference date is of considerable relevance.

If a person acquires a property on 30 December and is therefore the owner on the reference date, 31 December, they pay wealth tax (subject to an allowance) as if they had owned the property for the entire year. Conversely, the person is not liable for wealth tax if they sell their Spanish property on 30 December.

If this person is also a German non-resident who pays the proceeds of the sale into a Spanish account, they are also not liable for tax. This is because on the reference date they no longer own any real estate in Spain, but rather movable assets, i.e. money. And bank accounts of German taxpayers, like all other movable assets, are not subject to Spanish wealth tax.

Which debts can be considered when determining the wealth tax rate?

Wealth tax is a net tax: only net assets are taxed. This means that debts can be deducted from the tax base.

However, only debts that are directly related to investments in taxable assets (e.g. in the acquisition) can be considered. Only the portion of the debt that corresponds to the non-exempt value of the asset is deductible. For example, if a person takes out a mortgage-backed loan of €300,000 to purchase a main residence worth €500,000 (with an allowance of €300,000), they can only deduct the proportion of the debt that corresponds to the €200,000 that is not exempt from tax.

The debts must be properly documented. In the case of mortgage-backed debts, it is crucial that the loan was granted for the purchase of the property (or renovation, extension, etc., but not mere repairs).

For further information on whether you are required to submit a wealth tax return, which assets must be declared and further details, please feel free to contact us.

German Desk

germandesk@es.andersen.com