Spain’s new Wealth Tax – El impuesto sobre Grandes Fortunas


This tax is undoubtedly going to be one of the most polemical in Spain’s history of polemical taxes, and there are plenty. It has not yet become law but all the indications are that it will before the end of November 2022.

Spain’s state Government, desperate to eliminate the growth experienced by Madrid due to the autonomous region’s elimination of Wealth Tax many years ago, and fearful that Andalucia would enjoy the same success, has grossly distorted the Spanish tax system and its system of financing the regions by creating a duplicate Wealth Tax at the national level.

By saying a duplicate tax, I mean exactly that.

The new national tax, collected and controlled by the state makes no attempt to vary the existing regional Wealth Tax system, instead simply referring to the text of the regional law almost entirely and giving credit for any tax paid at the regional level.

The existing regional Wealth Tax is a matter exclusively of the autonomous regions who can tweak the allowances, the tax rates etc to their heart’s content, including its 100% exemption, as happened many years ago in Madrid and, for 2022 onwards, Andalucia.

So, in effect, the state has put itself into the place of the regions as the Wealth Tax collector. if the region collects Wealth Tax then the individual gets a full credit for what they paid by deduction from the national tax. If they don’t because they live in Madrid or Andalucia, they have to pay the full wack to the state and the region gets nothing. Neat!! That’ll teach the dastardly rich enabling capitalists politicians a lesson…

A lesson in what? I would suggest a lesson in how not to run a country that is meant to be fair to all its taxpayers and respect the rights, liberties and responsibilities of the autonomous regions that are enshrined in Constitutional Law, and whose Governments have been voted in by a majority of their populations. The conduct of the central Government invites inevitable and pejorative comparisons with those of less reputable countries of the world.

Other more illustrious commentators have referred to the tax as ‘confiscatory, abusive, illegal, anti-constitutional’, and, quite simply, ‘mad’.

The Governments of Madrid and Andalucia have just filed actions in Spain’s constitutional court to have the new tax declared illegal. This was completely predictable and indeed, I would suggest, part of the plan of central Government. It will allow the struggling and rudderless PSOE Government to proclaim its deeply socialist credentials to the voting population in 2023, which is a national election year. What will be very instructive is how the Constitutional Court handles this mess.

Now to the detail

Thankfully, a very simple story to explain:

Valuation of assets and liabilities: No surprises, exactly the same as the existing Impuesto sobre el Patrimonio, to the extent that all the reductions and exemptions for family business assets and similar, are allowed in the new tax.

Basic exemptions: The first 700.000€ of net asset value is fully exempt plus you get an extra allowance of up to 300.00€ on your home value. Same as the Provincial version of the tax.

Tax rates: after deducting the basic exemptions

  • First 3m€ – no tax
  • Between 3m€ and 5.3m€ – taxed at 1.7%
  • Between5.3m€ and 10.7m€ – taxed at 2.1%
  • Over 10.7m€ – taxed at 3.5%

This is a personal tax, applicable to each individual, so to put the tax into context, a married couple living in Madrid or Andalucia whose assets are evenly split could have net wealth of as much as 8m€ and not pay any tax at all. Those living on other areas of Spain will not be so fortunate as the regional form of Wealth Tax will still apply.

Limits when combined with income tax:

The same limiters are applied as the regional Wealth Tax. Explained as simply as possible: Income tax and wealth tax combined cannot exceed 60% of taxable income. If this is the case then Wealth Tax is reduced but the reduction is subject to the further limiting factor that Wealth Tax payable can never be less than 20% of what would have applied.

From when does it come into effect: 31 December 2022. What this means is that if you have lived in Spain as a tax resident in 2022, you cannot avoid the tax. You are trapped, by a tax that has not even become law yet!

How long will the tax last: The Government announced that it will have an initial duration of two years, so 2022 and 2023, and then we will see.


Inevitably, trying to avoid the tax if you have been living in Madrid and Andalucia will be the first thought for some “I’m getting out of Dodge quick” said the gunslinger, telling his accountant “Honest, I didn’t live in Spain for more than 183 days during 2022!”.

Beware, YOU WILL BE INSPECTED by the central tax office inspectors, with great care and pleasure as they rub their hands with glee at the prospect of pursuing their bonuses for assessing more tax. The central Government has already promised that this will happen. I believe them.

A parting word or two

When the first version of the Impuesto sobre el Patrimonio was introduced by the Ley 50/1977, in the first article of the law, it states “Se establece un impuesto excepcional y transitorio”. At that time, the modern state of post Franco Spain was being conceived and the country had no easily available external financial support and was justifiably desperate to boost its tax revenue.

But forty five years later, we have not one, but two Wealth Taxes. The second, also allegedly motivated by an urgent economic situation, despite Spain being the beneficiary of at least 160 billion € of the EU Covid recovery funds and not doing at all badly by EU standards.

Compounding this is the knowledge that the tax is not likely to raise more than 1b€. Its maximum gross take has been estimated at 1.5b€ and by the time the credits have been allowed for Wealth Tax paid to the regions, the net extra cash raised will undoubtedly be far less. This represents a miniscule fraction of the total tax revenues of Spain (OECD statistics for 2019 shows 431b€).

What does this say to the successful Spanish national or foreigner interested in living and investing in Spain? It says to me that Spain hates success and does not want successful people to live in the Country. You can be sure they won’t, exactly as happened in France a few years ago when Hollande ramped up Wealth Tax.

I have much faith in the sense of the Spanish voting population to make the change in Government that is so needed in next year’s elections, and then we can expect a centre right Government to get rid of Wealth Tax country wide, once and for all . Who knows, maybe the Constitutional Court will throw out this new tax in the meantime.

Spence Clarke specialises in the provision of Spanish tax, accounts, law and labour services, mainly to foreigners with interests in Spain. Our cross-border knowledge helps clients adapt to the Spanish system with the minimum of doubt and disruption. If you have any questions about this article or any other matter contact us, with no obligation, to see how we can help you.