Contents
How the luxury tax is formed
Tax benefits
«Solidarity» — Wealth tax changes in 2023
In 2011, the Spanish authorities introduced a luxury tax as a temporary measure to increase state revenues during the financial crisis. But already in 2013 the tax became permanent.
Luxury items like expensive real estate, luxury cars, yachts, and art objects are taxed. The specific rate depends on the region, but on average it ranges from 0.2 to 2.5%.
In what case to pay tax, what are the benefits and how to calculate it – further about it in this article.
How the luxury tax is formed
Spain has a progressive tax rate from 0.2 to 2.5%, with the maximum value depending on the region. For example, in Valencia, the tax is paid on property worth over 600 thousand euros and the rate is 3.1%. In Madrid luxury tax is not charged, and in Andalusia since September 2022 luxury tax is canceled completely.
Luxury tax by autonomy in Spain:
From €167,129 — 0.2% (max. €334)
€167,129 – €334,253 — 0.3% (max. €836)
€334,253 – €668,500 — 0.5% (max. €2,507)
€668,500 – €1,337,000 — 0.9% (max. €8,523)
€1,337,000 – €2,673,999 — 1.3% (max. €25,904)
€2,673,999 – €5,347,998 — 1.7% (max. €71,362)
€5,347,998 – €10,695,996 — 2.1% (max. €183,670)
Over €10,695,996 — 2.5%
Wealth tax in autonomous regions:
- Catalonia: 0.21% – 2.75%
- Asturias: 0.22% – 3%
- Murcia: 0.24% – 3%
- Cantabria: 0.24% – 3.03%
- Valencia: 0.25% – 3.12%
- Balearic Islands: 0.28% – 3.45%
- Extremadura: 0.3% – 3.75%
The tax rate is based on the value and type of goods. For example, there is no tax:
- Real estate – up to 700,000 euros
- Cars – up to 120,000 euros
- Yachts – up to 500,000 euros
- Artwork – up to 50,000 euros
In addition to physical items, bank deposits, stocks on stock markets, and intellectual property are also taxed.
For Example:
you have a house worth 400,000 euros and deposits in Spanish banks worth 2 million euros. In total, you have 2.4 million in assets. In this case, the calculation follows the scheme:
- According to current regulations, the taxpayer’s main dwelling is not subject to luxury tax up to an amount of €300,000. Since the value of the main dwelling is €400,000, only €100,000 is taken into account in calculating the tax base
- The total assets are reduced to €2.1 million
- The tax rate will be 1.3%
- The amount of tax payments: 27,300 euros, taking into account the maximum amount paid at your rate.
- the tax will be 25,904 euros.
Tax benefits
Based on the individual tax base calculation, the main way to reduce payments would be to diversify assets to different family members.
By law, the luxury tax cannot exceed 60% of your total and savings tax base. You can structure your investments to reduce the tax or not be subject to it at all. To do this, consult with tax professionals or accountants who can help you optimize your assets.
It is also important to consider non-taxable assets:
- Savings or insurance private pension accounts
- Home furnishings: furniture, appliances, utensils, etc.
- Property which is directly involved in the taxpayer’s business activity which brings him/her main income. For example, stocks or shares in company share capitals
- Artworks, antiques and other property officially recognised as historical heritage
- Rights to intellectual and industrial property which are not related to entrepreneurial activity
«Solidarity» – Wealth tax changes in 2023
On September 29, the Spanish Finance Minister announced a series of tax measures, some of which are already included in the draft general state budget for 2023.
Tax rates:
- €3–5 million – 1.7%
- €5–10 million – 2.1%
- Over €10 million – 3.5%
Furthermore, the regional wealth tax will be deducted from this new tax to avoid double taxation.
Starting from 2025, the “Solidarity” tax remains in effect and its extension to the assets of non-residents is also being considered. Additionally, a new federal luxury tax (15%–30%) is under discussion, which may apply to high-value vehicles, yachts, and private aircraft.
Due to constant changes in legislation and regional variations, consultation with professionals on tax matters is recommended to optimize the tax burden and avoid overpayments.