The Spanish Supreme Court has issued two rulings confirming that taxpayers who are non-residents in Spain may also reduce their Wealth Tax liability according to their income, as applies to taxpayers resident in Spain.
Article 31. One of the Wealth Tax Law provides that the combined amount of Wealth Tax and the Personal Income Tax may not exceed 60% of the taxpayer’s annual income, and that, if this limit is exceeded, the Wealth Tax liability may be reduced by up to 80%. Its purpose is to prevent confiscatory taxation that would force taxpayers to sell part of their assets in order to meet their tax obligations.
Until now, this limit had been applied only to residents; however, the Supreme Court has confirmed that non-resident status does not justify excluding individuals who own assets in Spain from this reduction. It also cited the 2014 judgment of the Court of Justice of the EU, which prohibited less favorable tax treatment for non-residents under the Inheritance and Gift Tax and extended this principle even to taxpayers from third countries.
In practice, these rulings affect both upcoming Wealth Tax filings (accrued as of 31 December each year) and previous tax years, allowing taxpayers to request amendments or refunds of undue payments for non-statute-barred periods, or, in certain cases, even for statute-barred periods through a special nullity procedure.
Likewise, following the same line of reasoning, this approach could be extended to other Spanish taxes levied on wealth, such as the Solidarity Tax on Large Fortunes.
Our Recommendation:
For non-residents in Spain and subject to Wealth Tax (EU and Non-EU residents):
- Review previous filings that are not statute-barred to determine whether the joint limit under Article 31.One of the Wealth Tax Law could have been applied.
- Submit correction requests and claim refunds for non-prescribed years to recover any potential overpaid taxes.
- Consider the joint limit in future filings and plan for adjustments if further legal clarifications arise.
Our law firm can assist you throughout the entire process to recover overpaid taxes and ensure your filings comply with the latest legal developments.
