Important notice: This article is for general information only and does not constitute legal or tax advice. Every tax situation is unique — contact Jacob Salama for personalised advice.
Spain's Wealth Tax: An Unusual European Levy
Spain is one of very few European countries that still imposes an annual wealth tax — the Impuesto sobre el Patrimonio (IP). It was temporarily abolished in 2008, reinstated in 2011, and has been renewed every year since. For Israeli nationals who own significant Spanish assets or who have become Spanish tax residents, the IP is a material charge that requires annual compliance and careful planning.
The IP is levied on the net value of assets: total assets minus qualifying liabilities (primarily mortgages secured on Spanish property). It is separate from income tax and applies in addition to any IRPF, IRNR or IRNR charges.
Who Is Subject to Spanish Wealth Tax?
Israeli Residents in Spain
An Israeli national who is a Spanish tax resident (spending more than 183 days per year in Spain, or having their principal economic interests here) is subject to IP on their worldwide net wealth. This means all assets wherever situated — Spanish property, Israeli bank accounts, Israeli securities, Keren Hishtalmut balances, foreign investments — are potentially within scope. The €700,000 individual exemption applies, as does the €300,000 exemption for the principal residence.
Israeli Non-Residents with Spanish Assets
An Israeli national who is not a Spanish tax resident but who owns Spanish-situated assets — typically real estate — is subject to IP on those Spanish assets only, not on their worldwide wealth. The €700,000 exemption still applies. If the value of the Spanish assets net of liabilities does not exceed €700,000, no IP is due and no return need be filed. If it exceeds €700,000, the excess is taxable.
Key point for Israeli property investors: A Spanish holiday home worth €1 million with no mortgage gives a net taxable base of €300,000 after the €700,000 exemption. At the national IP rate of 0.5% for that bracket, the annual charge is approximately €1,500. This is a real ongoing cost that Israeli buyers often overlook.
Wealth Tax Rates
The national IP scale is progressive:
| Net Taxable Wealth Band | National Rate |
|---|---|
| €0 – €167,129 | 0.20% |
| €167,129 – €334,253 | 0.30% |
| €334,253 – €668,500 | 0.50% |
| €668,500 – €1,337,000 | 0.90% |
| €1,337,000 – €2,673,999 | 1.30% |
| €2,673,999 – €5,347,998 | 1.70% |
| €5,347,998 – €10,695,996 | 2.10% |
| Above €10,695,996 | 3.50% |
These are the national rates. Autonomous communities may deviate. Since non-residents cannot be assigned to a specific autonomous community for IP purposes, they are taxed at the national scale.
Regional Bonificaciones: Andalusia and Madrid
The most important planning consideration for IP is regional variation. Andalusia and Madrid — two of the regions most popular with Israeli buyers — both apply a 100% bonificación on the IP. This means Spanish tax residents whose habitual residence is in Andalusia or Madrid effectively pay zero IP.
This is a powerful incentive. An Israeli national who relocates to Spain and establishes tax residency in Andalusia or Madrid can hold significant Spanish assets — property, investments, bank deposits — without any annual IP charge. By contrast, a resident of Catalonia faces rates of up to 3.48% plus the solidarity surcharge on very large fortunes.
Following a 2023 amendment to the rules on regional application, non-resident taxpayers (including Israeli non-residents) now also benefit from the most favourable regional regime applicable to their situation — meaning non-resident Israelis can in principle access the Andalusia or Madrid 100% reduction. However, the practical application of this rule for non-residents requires careful analysis.
The Solidarity Wealth Surcharge (ITSGF)
From 2023, Spain introduced the Impuesto Temporal de Solidaridad de las Grandes Fortunas (ITSGF) — a national solidarity surcharge designed to neutralise the benefit of the Andalusia and Madrid bonificaciones for very large fortunes. The surcharge applies to net wealth above €3 million:
- 1.7% on the tranche between €3m and €5m
- 2.1% on the tranche between €5m and €10m
- 3.5% on wealth above €10m
The ITSGF is creditable against IP already paid, so it functions as a minimum IP charge for high-net-worth individuals. For Israeli non-residents, the ITSGF applies to Spanish-situated net wealth above €3 million.
What Is Exempt from Spanish Wealth Tax?
- Principal residence: Exempt up to €300,000 per taxpayer (residents only; non-residents cannot claim this exemption).
- Family business exemption: Shares in qualifying family businesses and certain professional assets may be fully exempt, subject to conditions on activity, share ownership and management participation.
- Personal effects and ordinary use assets: Household furniture, clothing, vehicles up to a threshold.
- Pension rights: Rights under certain occupational pension schemes may be excluded. However, Israeli pension vehicles (Keren Hishtalmut, Kupat Gemel) are not formal pension schemes under Spanish domestic law and may not qualify for this exemption — a point that requires specific legal analysis.
Valuation of Israeli Assets for Spanish Residents
Spanish residents must value their worldwide assets for IP purposes. Israeli assets are valued in accordance with Spanish IP rules, which generally require:
- Bank accounts: Average balance over the last quarter of the tax year, or the balance on 31 December if higher.
- Quoted securities: The average trading price in the last quarter of the year on the relevant exchange (TASE for Israeli shares).
- Israeli real estate: The higher of purchase price, cadastral value equivalent (if any), or value per a valuation report.
- Keren Hishtalmut / Kupat Gemel: The accumulated surrender value as of 31 December.
The Modelo 714 (IP return) must be filed by the same deadline as the IRPF return — typically late June of the year following the tax year. For non-residents subject to IP, the return is filed on Modelo 714-NR through the AEAT electronic platform.
Is Your Spanish Wealth Tax Position Optimised?
Jacob Salama advises Israeli nationals on minimising their Spanish IP exposure through residency location planning, asset structuring, and ensuring correct valuation of Israeli financial assets.
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