Spain's wealth tax, known in Spain simply as Patrimonio, does not ask you what you believe your assets are worth. It tells you how to value each class of asset, using a rule of its own written into Ley 19/1991, the Wealth Tax Act, and that rule does not always match market value or what you paid. Two classic surprises come out of that gap: declaring too little for a property bought thirty years ago, and declaring far too much for a company that pays out nothing. This guide goes through the list one asset at a time.
Everything is measured on 31 December
The tax falls due, in Spanish terms it is "devengado", on 31 December, and it taxes your net wealth on that single day. There is no apportionment by time held: a flat sold on 30 December is not declared at all, while one bought on the 29th is declared in full. Nor is there any annual average. Think of it as a photograph rather than a film, which is why the date on which a December deed is signed before the notary matters more than people expect.
Net wealth is the sum of your assets and rights, each valued under the rules below, minus the charges and encumbrances that reduce their value and minus the debts for which the taxpayer is personally liable. Exempt assets drop out of the taxable base, but, and this is important, they do not drop out of the test that decides whether you have to file at all. That test is explained in the two doors into the filing obligation.
Real estate: the highest of three values
Article 10 of Ley 19/1991 makes you compare three figures and keep whichever is highest:
| Value to compare | Where it comes from |
|---|---|
| Valor catastral, the cadastral value set by the Spanish land registry office | The figure on that year's IBI bill (the local property tax), without splitting land and building |
| Value established by the tax authorities for the purposes of other taxes | The figure that came out of an official valuation check in transfer tax (ITP) or inheritance tax, if there was one |
| Price, consideration or acquisition value | The figure in the purchase deed, in the inheritance tax assessment or in the gift |
That value is carried forward year after year and is never updated to the market. A flat bought in 1998 at the prices of the time can still be declared at its cadastral value even if today it is worth four times as much, and that is correct. It also works the other way round: a home bought dear in an area whose prices then collapsed goes on weighing in the base at the price paid.
The valor de referencia, a value per property that the Catastro publishes each year, is not mentioned in article 10, because it belongs to transfer tax (Transmisiones Patrimoniales) and to inheritance and gift tax. But when that reference value was the taxable base on which your purchase or your inheritance was assessed, it becomes the "acquisition value" of the property and, by that route, it can end up as the highest of the three. Anyone who acquired after the system came into force needs to check this before copying last year's figure.
Three situations have a rule of their own. Buildings under construction are valued at the amounts invested up to the accrual date plus the value of the plot; in a building divided into flats, the proportional share of the plot. Timeshare rights are valued at their acquisition price when they do not amount to part-ownership of the property. And let property gets no discount at all for being let: anyone who declares it for less because the tenant has an old contract is inventing a rule the law does not contain.
Accounts, deposits and the average balance of the last quarter
Bank accounts are not simply declared at the balance showing on the night of 31 December. They are declared at the higher of two figures: the balance on that date and the average balance over the last quarter of the year. The rule exists precisely so that emptying the account on New Year's Eve achieves nothing.
| Account | Balance at 31-12 | Average balance, Q4 | Declared |
|---|---|---|---|
| Main current account | 18,400 | 41,200 | 41,200 |
| Savings | 95,000 | 88,300 | 95,000 |
| Securities account (cash) | 2,100 | 1,900 | 2,100 |
Article 12 itself supplies the counterweight: the average balance does not count funds withdrawn to acquire assets or rights that appear in your wealth, nor funds used to repay or reduce debts. If in November you took money out of the account to pay the deposit on a house you now declare as property, that amount cannot inflate the average balance, because you would be declaring the same wealth twice. Keeping the statement that links the withdrawal to the purchase is what supports the argument if a formal request from the tax office ever arrives.
Listed securities: the fourth-quarter average
Shares and units traded on organised markets, and securities representing loans of capital to third parties (bonds, debentures, bills), are counted at their average trading value for the fourth quarter, not at the closing price on 31 December. Each year the tax authorities publish a list of average prices for this purpose, and that list is the reference used in any check. For foreign securities missing from the list, you work out the average from the data of the market where they trade and keep the workings.
Units in investment funds and other collective investment schemes follow a different rule, the one in article 14: net asset value on the accrual date, meaning 31 December. No quarterly average here. It is a detail that gets mixed up often, because in the bank's portfolio statement both kinds of holding appear side by side.
Unlisted companies: the rule that hurts most
Article 16 draws a distinction according to whether the accounts are audited. If the last approved balance sheet has been audited and the audit report is clean, you take the book value (valor teórico, the share of net equity) resulting from that balance sheet. If there is no audit, or the report is not clean, you take the highest of these three:
- the nominal value of the shares;
- the book value from the last approved balance sheet;
- the figure obtained by capitalising at 20 % the average profit of the three financial years closed before the accrual date.
Capitalising at 20 % is the same as multiplying by five. That is where the trap lies: a company with modest equity but steady profits shoots up in value.
| Figure | Amount |
|---|---|
| Share capital (nominal value of the partner's holding) | 60,000 |
| Book value from the last approved balance sheet | 185,000 |
| Average profit over the last three financial years | 90,000 |
| Capitalisation at 20 % (90,000 ÷ 0.20) | 450,000 |
| Value to declare | 450,000 |
The partner in this example has sold nothing, has not received that money and probably could not sell the holding even if he wanted to. Even so, he declares 450,000 euros. Where the facts allow it, the way out is not to argue about the valuation. It is to check whether the holding qualifies for the family business exemption, which is what really changes the result. Whether it qualifies depends on facts that can be verified, and we cannot predict the view the tax authorities will take in each file.
Life insurance and annuities
Life insurance policies are counted at their surrender value on 31 December, a figure you ask the insurer for, and one that is usually quite different from the premiums paid. Where the policyholder has no right to surrender the policy in full, which is normal in certain savings products designed exactly that way, the policy is counted at the value of its mathematical provision (the insurer's technical reserve), so the absence of a surrender right no longer keeps the product outside the tax. Temporary or lifetime annuities coming from an insurance policy are capitalised using the rules of the transfer tax, the Impuesto sobre Transmisiones Patrimoniales.
Pension plans: not valued, because they are exempt
The vested rights of a member in a Spanish pension plan are exempt under article 4.Cinco, as are the economic rights arising from premiums paid into insured pension plans, occupational welfare plans, certain group insurance contracts that fund pension commitments, and private long-term-care insurance. That is why they do not need a valuation.
Exempt assets pay nothing, but they do count when working out whether you must file a return through the second door, the two-million one. Wealth made up largely of pension plans and the main home may generate no tax at all and still oblige you to file. It is the most frequent mistake in the regions where the tax carries a relief that reduces it.
Cars, boats, jewellery, art
Vehicles, boats, aircraft, jewellery, works of art and antiques are valued at market value on the accrual date. For vehicles there is an official table of average sale prices, approved every year, which serves as a reasonable reference; for everything else, the market value has to be supportable with a professional valuation, an invoice or comparable prices.
There are specific exemptions: works of art and antiques lent on permanent deposit to museums or non-profit cultural institutions, those below the amounts set by Spain's historical heritage legislation, and an artist's own work while it stays in his or her hands. Household contents (ajuar doméstico) are exempt too, and here the phrase means exactly what it says: the everyday things in the home, not the painting bought as an investment.
Life interests, bare ownership and options
Rights to enjoy an asset are valued under the rules of the transfer tax. A lifetime usufruct, the Spanish life interest, is worth 70 % of the full value of the asset when the holder is under twenty, and that percentage falls by one point for every additional year of age, with a floor of 10 %. A usufruct for a fixed term is worth 2 % for every year it lasts, capped at 70 %. Bare ownership (nuda propiedad) is the remainder: the value of the asset minus the value of the usufruct. A parent who gave the bare ownership of a flat to the children and kept the usufruct goes on declaring the usufruct, and the children declare the bare ownership from the very first year.
Debts, and the ones you cannot subtract
Debts are valued at their nominal amount on the accrual date and subtracted from the total. But not all of them. Debts taken on to acquire exempt assets or rights are not deductible, and when the exemption is partial the debt is deducted in the same proportion. The mortgage on the main home, whose exemption is capped at 300,000 euros, is only subtracted in the part that corresponds to the taxable excess. Nor can you deduct debts for which you are not liable: a guarantee given for someone else who has not yet defaulted is not a debt of your own.
Quick reference table
| Asset | Rule |
|---|---|
| Real estate | The highest of cadastral value, value established by the authorities, or acquisition value |
| Accounts and deposits | The higher of the balance at 31-12 and the average balance of the fourth quarter |
| Listed shares and bonds | Average trading value of the fourth quarter |
| Investment funds | Net asset value at 31 December |
| Unlisted shares | Audited book value, or the highest of nominal, book value and capitalisation at 20 % |
| Life insurance | Surrender value; mathematical provision if there is no surrender right |
| Pension plans | Exempt |
| Vehicles, jewellery, art | Market value on the accrual date |
| Usufructs and bare ownership | Transfer tax rules |
| All other assets and rights | Market value on the accrual date |
Once the valuation is done, two checks remain: whether the tax runs into the joint ceiling with income tax, and whether the solidarity tax has to be added on top. If you would rather we reviewed it with your documents in front of us, tell us about it in the wealth tax form. With the bank statements, the deeds and the company accounts it can be seen in an afternoon, and we tell you what comes out and what it costs to handle. What we do not do is promise a result before we have seen the papers.