Gérard Lemaire is Belgian, was an executive at an insurance company and retired to Alicante in 2020. His wealth is large and his income small: he lives on a Belgian pension of about 30,000 € a year and about 10,000 € of interest and dividends, because almost all his portfolio is in accumulation funds that pay out nothing. In 2025 he also sold some shares he had held since 2012, making a gain of 200,000 €. His wealth tax base on 31 December was 3,000,000 €, including 200,000 € in gold bars. He had heard of a "tax shield" that limits what you pay when your income is low. It exists, but it does not work as he thought, and the 2025 gain does not help him.
The rule in article 31
Article 31 of Law 19/1991 provides that the gross wealth tax, added to the IRPF (Spanish personal income tax) bills, cannot exceed, for those taxed on a personal basis, 60 % of the total IRPF tax bases. If it is exceeded, the wealth tax is reduced until that limit is reached, but the reduction cannot exceed 80 %. In other words: you always pay at least 20 % of the wealth tax.
The law adds two adjustments that change the result a great deal:
| Adjustment | What it excludes | Effect |
|---|---|---|
| On income (art. 31.Uno.a) | The part of the savings base that comes from gains on the sale of assets acquired more than one year earlier, and the IRPF tax corresponding to that part | A large capital gain does not widen the cap |
| On wealth (art. 31.Uno.b) | The part of the wealth tax corresponding to assets that, by their nature or purpose, are not capable of producing income taxed under IRPF | That part is added separately, without benefiting from the cap |
Gérard's calculation, step by step
We will use the national wealth tax scale to illustrate the mechanism; his region has its own scale and its own allowance, which can be checked in the table on the page about the tax. We take the IRPF bill as an assumed figure, because it depends on the regional scale and on his personal circumstances.
1. IRPF bases that count for the cap.
- General base: 30,000 € of pension.
- Savings base without the long-term gain: 10,000 €.
- The 200,000 € gain is excluded, because he had held the shares for more than a year.
- Total: 40,000 €.
2. Cap. 60 % of 40,000 € = 24,000 €.
3. IRPF tax corresponding to those bases. Suppose it is 9,000 €. The tax he paid on the 200,000 € gain does not go into the sum either.
4. Gross wealth tax. Taxable base of 2,300,000 € on the national scale: 21,042.37 €.
5. Part corresponding to the gold. The gold bars do not produce income taxed under IRPF. For the example we split the tax in proportion to the weight of the gold in the tax base: 21,042.37 × 200,000 ÷ 3,000,000 = 1,402.82 €. That part is left out of the cap calculation.
6. Wealth tax compared with the cap. 21,042.37 − 1,402.82 = 19,639.55 €.
7. Sum of the two taxes. 9,000 + 19,639.55 = 28,639.55 €. It exceeds the cap by 4,639.55 €.
8. Maximum possible reduction. 80 % of 21,042.37 € = 16,833.90 €. The excess is smaller, so it is reduced in full.
9. Wealth tax after the cap. 21,042.37 − 4,639.55 = 16,402.82 €.
The "shield" saved Gérard a little under 4,700 €. Much less than he expected, for two reasons: the 200,000 € gain does not go into the bases for the cap, and the gold does not benefit from it.
When the 20 % floor governs
Imagine that Gérard had no pension and his IRPF bases were only 5,000 €, with an assumed tax of 900 €. The cap would be 3,000 €. The sum, 900 + 19,639.55, would exceed it by 17,539.55 €. But the reduction cannot be more than 16,833.90 €. Wealth tax would be 21,042.37 − 16,833.90 = 4,208.47 €, exactly 20 % of the gross tax. However low income falls, that floor does not move.
The cap is designed so as not to overtax wealth that generates little income. But the part of the tax corresponding to assets that by their nature or purpose do not produce income taxed under IRPF is left out. Gold, art, jewellery or unused land are the usual examples. Which assets fall into that category and how the tax is split between them is debatable in many cases, and the approach the authorities will take cannot be guaranteed.
The trap of funds that do not pay out
Gérard's accumulation funds can produce taxed income, even if they do not distribute it: when they are redeemed they generate gains. That is why they are not excluded like the gold. But their practical effect is different: as long as they are not sold, they add almost nothing to the IRPF base, and the cap turns out very low. That is why financial wealth held in accumulation funds is what most often hits the 20 % floor.
As a couple filing jointly
If the spouses file IRPF jointly, the cap is calculated by adding together both spouses' wealth tax, and the reduction is shared between them in proportion to their gross taxes (art. 31.Dos). Each keeps their own 20 % floor. When one has almost all the wealth and the other almost all the income, a joint return can improve the result; it is worth calculating both options.
Only for those taxed on a personal basis
The cap only applies to residents. A non-resident taxed in Spain on a non-resident basis, on their property here, has no joint cap, because they do not file IRPF in Spain. We look at it in what goes into my wealth tax as a non-resident.
And in the solidarity tax
The temporary solidarity tax on large fortunes has its own cap: the sum of IRPF, wealth tax and solidarity tax cannot exceed 60 % of the IRPF bases, and if it does, the solidarity tax is reduced, also with a maximum of 80 %. Anyone whose wealth tax has already been reduced by the cap has to redo the calculation for the second tax. The mechanism is in what the solidarity tax is.
How to prepare it
The cap means the income tax return has to be finished before the wealth tax return. We need the IRPF bases and tax separated by type of income, the details of the gains with their purchase dates and the list of assets that produce no income. You can send it to us through the wealth tax form. The guide on the joint income-wealth cap develops the borderline cases, and the valuation of gold and art is in cars, art, jewellery and gold.
The joint cap, each region's scales and the rest of the Modelo 714 calculation are explained on the Salama Tax page on the wealth tax.