In previous articles we explained that the Spanish Government reintroduced wealth tax in 2011 as an emergency economic measure. The reintroduction was achieved simply by removing the 100% exemption to the tax that had originally been introduced in 2008.
However, the tax was eliminated for the majority of potential taxpayers because a significant tax free allowance of 700.000 € was granted for 2011 and 2012 plus a further exemption of up to 300,000€ in respect of the net of mortgage value of an individual’s home.
In 2012, the Spanish Government again decided that it was necessary to keep wealth tax in force for 2013, but gave a strong indication that it would be abolished for 2014.
The Spanish Government published on 30 September 2013 the draft Budget for 2014 and unsurprisingluy changed its mind yet again and is proposing to retain wealth tax for 2014, as a continuing measure to reduce the Spanish deficit. The Spanish defecit is about to reach 100% of its PIB (Producto Interior Bruto).
The god news (potentially at least) is that the draft provision in the budget makes it unequivocal that the 100% exemption is to be reinstated for 2015 onwards. Bearing in mind how many times this Government has changed its mind, one cannot guarantee that 2014 will indeed be the last year of wealth tax in Spain but economic indicators are showing positive signs and we are observing a marked improvement in econo,mic activity in this part of Spain.
We also have to remember that wealth tax has been fully ceded to the autonomous regions of Spain, which have extensive powers to modify the tax regime. This means that Andalucia, for example, could reverse the 100% exemption legislated by the state and continue to charge its own tax residents.
Only the lucky residents in Madrid continue to enjoy the 100% wealth tax exemption!