Johan de Vries is Dutch, lives in Utrecht and spends about ten weeks a year in Spain. He owns a flat in Estepona valued for the purposes of the tax at 650,000 €, with a 200,000 € mortgage from a Spanish bank; a let flat in Madrid worth 400,000 €, which he bought with a 150,000 € loan from a Dutch bank; 80,000 € in a Spanish account; and 120,000 € in shares of a listed Spanish company. He is also the sole shareholder of an unlisted Dutch company whose only asset is a villa in Marbella; his shares are worth 500,000 €. His adviser in the Netherlands asked him whether the Spanish wealth tax affects him. What counts has to be separated from what does not, and the Dutch company is the least expected part.
Non-resident taxation: only what is located in Spain
Article 5.Uno.b of Law 19/1991 makes non-residents subject to the tax on a non-resident basis (known as "real" liability), only on assets and rights that are located, can be exercised or have to be performed in Spanish territory. The house in Utrecht, his funds with a bank in Amsterdam and his Dutch pension plan are outside the Spanish tax.
Residence is determined under the IRPF (Spanish personal income tax) rules (art. 5.Dos). If Johan spent more than 183 days in Spain in a year, or had the centre of his economic interests here, he would stop being a non-resident, and the question would change completely. Anyone in doubt about their residence should start with two countries consider me resident.
The Dutch company is also an "asset located in Spain"
Since Law 38/2022, the same article treats as located in Spain securities representing the equity of unlisted entities whose assets consist, directly or indirectly, of at least 50 % property located in Spain. For the calculation, the book values of the assets are replaced by market values on 31 December, and the properties by the value that would apply to them for the tax.
Johan's company only owns the villa in Marbella. Its assets are one hundred per cent Spanish property. His shares, although they are in a Dutch company and held in the Netherlands, are counted in his Modelo 714 as an asset located in Spain. Holding a Spanish property through a foreign company no longer takes it outside the tax.
Which debts are deducted
Article 9.Cuatro limits a non-resident's deductions to charges on assets located in Spain and to debts for capital invested in them. What matters is where the money went, not the nationality of the bank.
| Debt | Bank | Deducted? | Reason |
|---|---|---|---|
| Mortgage on the Estepona flat | Spanish | Yes | It is secured on an asset located in Spain |
| Loan to buy the Madrid flat | Dutch | Yes | Capital invested in an asset located in Spain |
| Mortgage on his house in Utrecht | Dutch | No | It finances an asset that is not in the base |
Johan will have to prove with the contract and the bank movements that the Dutch loan financed the Madrid flat.
Johan's calculation
- Estepona flat: 650,000 €.
- Madrid flat: 400,000 €.
- Spanish account: 80,000 €.
- Listed Spanish shares: 120,000 €.
- Shares in the Dutch company: 500,000 €.
- Total assets: 1,750,000 €. It does not exceed the 2,000,000 € that oblige you to file even when there is no tax.
- Deductible debts: 200,000 + 150,000 = 350,000 €. Tax base: 1,400,000 €.
- Tax-free allowance: 700,000 €, which article 28.Tres declares applicable to those taxed on a non-resident basis. Taxable base: 700,000 €.
- Gross tax using the national scale: 2,790.36 €.
The Estepona flat has no main home exemption. The exemption refers to the IRPF concept of main home, and Johan is not a taxpayer for that tax: although for him it is "his house in Spain", it is counted in full.
Which region's rules
The fourth additional provision of the law gives non-residents the right to apply the rules of the autonomous community (Spanish region) where the greatest value of their assets and rights located in Spain lies. In Johan's case, between the Estepona flat and the Marbella villa held by his company, the greatest value is in Andalucía, compared with the 400,000 € in Madrid. The effect of those rules on his allowance, his scale and any relief can be checked in the table on the page about the wealth tax. If under them the tax comes to zero and his assets do not reach two million, Johan does not have to file Modelo 714.
The rule looks at the greatest value of the assets located in Spain calculated under the rules of the tax, not at whichever region suits you best. If those values change from one year to the next, the applicable rules may change too. It is worth redoing the calculation every tax year and keeping a record of how it was reached.
Representative and liable parties
Article 6 requires a non-resident to appoint a representative resident in Spain when they operate through a permanent establishment or when, because of the size and nature of their wealth, the authorities require it; failure to do so is punished with a fixed fine of 1,000 €. The same article makes the depositary or manager of their assets in Spain jointly and severally liable for payment. In the solidarity tax on large fortunes the obligation to appoint a representative is broader for residents outside the European Union; we explain it in what the solidarity tax is.
Other situations of non-resident taxation
The regime in article 93. Anyone who opts for the regime for workers moving to Spain is resident in Spain, but the IRPF Law makes them subject to wealth tax on a non-resident basis. They are taxed only on their Spanish assets, just like Johan.
Someone who stops being resident. They can opt to continue being taxed on a personal basis, by filing the return that way in the first tax year in which they are no longer resident (art. 5.Uno.a). It is an option that is rarely of interest, but it exists.
Income from those same assets. Modelo 714 does not replace the non-resident income tax returns for the rent from the Madrid flat or for the imputed income on the Estepona flat. They are different taxes, and we deal with them in do I have to pay wealth tax as a non-resident and in what imputed property income is.
If you have assets in Spain and live abroad, you can send us the list of properties, accounts, shares and loans through the wealth tax form. What has to be declared in your country of residence for those same assets is not part of our analysis: it must be confirmed by the client's adviser there.
Non-resident taxation, the allowances by region and the rules for Modelo 714 are explained on the Salama Tax page on the wealth tax.