So the government is going to re-introduce the wealth tax on “fortunes” larger than about 700,000 euros. Of course, since this is just electioneering, the really wealthy are excluded from this tax, given that they have a vast array of loopholes they can use to avoid this tax. Including:
- Corporate ownership. If you own more than 5% of a company and are on the board of directors or CEO, you don’t need to pay taxes on these shares.
- SICAV: These are effectively mutual funds that are require a 2.1 million initial investment, and are subsequently only taxed at 1%. The rules around SICAVs are very loosely enforced and the Tax Office cannot even investigate possible fraud without going through the Spanish equivalent of the SEC.
- Palaces and other historical buildings are exempt (I’m sure the Duchess of Alba will be happy)
So basically, this is effectively the really rich making sure that the aspirational rich don’t make it up the next rung. But even the aspirational rich can use the above methods to avoid these taxes, so who is left? My guess is that the only people who will pay are:
- People just over the 700,000 boundary where it’s not worth it to try to avoid it
- People that are real estate rich, but money poor (eg old people who happen own a house that is now in a very desirable neighborhood)
2 comments:
Your first home "vivienda habitual" has an exemption of 350000 per person (a couple 700000) on the "valor catastral" of your home. That is the official value of your home that you pay urban tax on. It is usually far lower than the values you may see in estate agent windows.
For any other wealth, the exemption is around 700,000 per person, so you would need to pay on anything more than 1.4 million euros that you own in properties or shares etc. I think that does exclude a large number of ordinary tax payers.
Of course you are right in saying that the really rich get away with it, but it is a problem in most countries, and a different strategy to tackle that issue.
Although I have heard that the catastral values in some of the hardest hit parts of Spain are unreasonably high...
I agree that the rich getting away with it is a problem everywhere, but this is supposed to be a tax on the rich! They could at least make it hard enough to avoid so that anyone paying it doesn't feel like a patsy.
Oh and also, this tax won't apply in Madrid, Basque Country or Navarra. So expect a wave of empadronamientos by Dec 31st.
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