Since 2022, high net worth taxpayers in Spain have been subject to not one but two wealth taxes. While this may appear redundant at first glance, each tax has a distinct legal basis and tax purpose. As at 31 December 2024, both the Wealth Tax and the Great Fortunes Tax remain fully in force.
Understanding how these two taxes interact is essential for anyone with significant personal wealth in Spain.
The Regional Player: Spain’s Wealth Tax Explained
The Spanish Wealth Tax is a long-established levy on personal net wealth. Although it is a national tax, responsibility for its regulation and collection has been transferred to the different regions of Spain. These regions have the power to set their own tax bands, exemptions, and discounts.
At the national level, the tax applies to individuals with a net wealth exceeding 700,000€, in addition to an extra exemption of 300,000€ for the taxpayer’s main home. Tax rates are progressive, ranging from 0.2% to 3.5%, although several regions have introduced their own scales with higher top rates.
For example:
- Catalonia: up to 3.48%
- Extremadura: up to 3.75%
Regions such as Madrid, Andalusia, and Galicia offered a 100% rebate, effectively nullifying the tax liability. However, following the introduction of the Great Fortunes Tax, several of these regions adjusted their tax laws. As of 2023, Madrid and Andalusia now limit their Wealth Tax rebate to the amount that would have been payable under the Great Fortunes Tax.
This change ensures that taxpayers still pay an equivalent amount, but via Wealth Tax (which is retained by the region), rather than through the Great Fortunes Tax (which is collected by the central government). In practice, this legal mechanism has allowed regional governments to maintain control over the tax revenue generated by high-net-worth residents.
The National Response: A Closer Look at the Great Fortunes Tax
The Great Fortunes Tax was introduced in late 2022 as part of Spain’s tax response to the economic impact of global crises.
Contrary to the Wealth Tax, this is a state-level tax with no regional adjustments or rebates. It applies to individuals whose net wealth exceeds 3€ million, using a progressive scale:
- From 3€ to 5.3€ million: 1.7%
- From 5.3€ to 10.6€ million: 2.1%
- Above 10.6€ million: 3.5%
The tax base and valuation rules are virtually identical to those of the Wealth Tax, and the same exemptions apply. Importantly, the 3.000.000 € threshold is applied first. On top of this, residents benefit from a general exemption of 700.000 €, plus 300.000 € for the main residence, while non-residents are entitled to the 700.000 € exemption only. In practice, this means that a resident owning a main home can hold up to 4.000.000 € in assets before being taxed, whereas a non-resident will be taxed from 3.700.000 €.
It is important to note that the amount paid under the Wealth Tax is deductible from the liability under the Great Fortunes Tax. However, the reverse is not true. If no Wealth Tax is paid — for example, due to a regional rebate — the taxpayer must pay the full amount of the Great Fortunes Tax. This mechanism effectively ensures that high-net-worth individuals pay one tax or the other, but not both.
The tax is filed using the tax form 718, and the filing period runs until 31 July of the following year.
Two Systems, One Outcome?
Despite being different taxes, the Wealth Tax and the Great Fortunes Tax share many technical aspects:
- Both taxes are based on net wealth as at 31 December.
- The valuation criteria for assets and liabilities are essentially identical.
- The same asset exemptions apply, including qualified business assets.
Due to the recent regional reforms, in practice, many high-net-worth taxpayers pay an amount equivalent to the Great Fortunes Tax, but through the Wealth Tax. This allows regions like Madrid and Andalusia to retain the revenue, while avoiding a direct application of the state tax.
A Long-Term Structure or Just a tax Stopgap?
What began as a temporary state measure has now become a permanent feature of the Spanish tax system — at least for the time being. The co-existence of the two taxes creates a complex compliance environment for affected individuals. From a legal standpoint, double taxation is avoided, since the taxes do not apply cumulatively. However, the existence of two separate liabilities, filing requirements, and administrative processes has prompted objection from both taxpayers and advisors.
Furthermore, the fact that several regions have modified their Wealth Tax rebates to absorb the impact of the Solidarity Tax raises interesting questions about intergovernmental competition and the true intent behind the state measure. Was the Great Fortunes Tax genuinely designed to increase tax equity, or was it simply a method to reclaim revenue lost to regional rebates?
Regardless of the motive, the practical result is clear: for individuals with substantial wealth, Spain has become a more complex and more costly jurisdiction from a tax perspective. Whether this dual system will eventually consolidate into a single, streamlined tax remains uncertain. For now, taxpayers must organise their assets appropriately and prepare to adapt if the rules change again.
