Wealth Tax and Solidarity Tax for High-Value New-Build

Purchasing a new-build property on the Costa del Sol offers an appealing lifestyle and investment opportunity for foreign buyers. However, understanding the Spanish tax landscape, particularly for high-value assets, is crucial. This guide provides an authoritative overview of Spain’s Wealth Tax (Impuesto sobre el Patrimonio) and the Temporary Solidarity Tax on Great Fortunes (Impuesto Temporal de Solidaridad de las Grandes Fortunas), focusing on their implications for non-resident buyers of new-build properties in Andalusia.

Understanding Wealth Tax (Impuesto sobre el Patrimonio – IP)

The Impuesto sobre el Patrimonio (IP) is a direct and personal tax levied on the net wealth of individuals as of 31st December each year. While it is a state tax, its collection is 100% ceded to Spain’s autonomous communities, which have the power to regulate various aspects, including minimum exemptions, tax rates, and bonuses.

Who is Affected?

For foreign buyers (non-residents), the Wealth Tax applies to assets and rights located, exercisable, or to be fulfilled within Spanish territory. This means that a new-build property on the Costa del Sol is subject to this tax for non-resident owners.

Andalusia’s Specific Rules for IP

Historically, Andalusia, like some other autonomous communities, introduced a 100% bonus on the Wealth Tax, effectively eliminating the tax liability for residents and, under certain conditions, for non-residents with their primary Spanish assets in the region. This made Andalusia a particularly attractive location for high-net-worth individuals.

However, the introduction of the Temporary Solidarity Tax on Great Fortunes has significantly altered this landscape. For the years 2024 and 2025, while the Solidarity Tax remains in force, Andalusia’s specific IP scale and the 100% bonus are effectively modified. The regional rules now ensure that taxpayers will not pay more than they would have under the 2023 regulations, and any amount paid for IP in Andalusia reduces the liability for the Solidarity Tax.

Wealth Tax Thresholds and Declaration Obligation

At a state level, there is a general minimum exemption of €700,000 per taxpayer. This means that if your net wealth subject to Spanish Wealth Tax falls below this amount, you typically do not have to pay the tax. However, the obligation to file a Wealth Tax return (Modelo 714) exists if your net wealth exceeds €2,000,000, even if the resulting tax liability is zero after applying exemptions and bonuses.

Valuation of New-Build Property for IP

When assessing the value of your new-build property for Wealth Tax purposes, the following rules apply:

1. Acquisition Price: The actual price paid for the property, including any associated costs and taxes inherent to the acquisition (e.g., IVA, AJD, notary fees, registration fees).
2. Cadastral Value: The value assigned by the Cadastre (a government administrative registry) to the property, which is generally lower than the market value.
3. Reference Value (Valor de Referencia): A value determined by the Dirección General del Catastro based on market prices from notarised property sales. This value applies to properties acquired from 1st January 2022 onwards and acts as a minimum taxable base for various taxes, including Wealth Tax, if it was used as the tax base during acquisition.

For Wealth Tax purposes, the property’s value is taken as the highest of these three values. For new-build properties still under construction as of 31st December, the value declared is the sum of the amounts actually invested in the construction up to that date, plus the proportional value of the land.

Filing the Wealth Tax Return

The Wealth Tax return is filed using Modelo 714. The deadline for filing typically aligns with the annual income tax campaign, usually from April to June of the year following the tax year. The presentation must be done electronically via the Agencia Tributaria’s website.

Temporary Solidarity Tax on Great Fortunes (Impuesto Temporal de Solidaridad de las Grandes Fortunas – ITSGF)

The Impuesto Temporal de Solidaridad de las Grandes Fortunas (ITSGF) is a state-level direct, personal, and complementary tax to the Wealth Tax. It was introduced by Law 38/2022 to ensure a minimum taxation on large fortunes across Spain, particularly addressing situations where autonomous communities apply significant Wealth Tax bonuses.

Nature and Duration

Initially designed as a temporary tax for the years 2022 and 2023, the ITSGF has been prorogued indefinitely since December 2023. Its application will continue «until the taxation of wealth is reviewed in the context of the reform of the autonomous community financing system». Therefore, it remains fully in effect for 2024 and 2025.

Who is Affected?

The ITSGF applies to individuals whose net wealth exceeds €3,000,000. For non-residents, this tax applies to assets located in Spain, similar to the Wealth Tax. Crucially, the €700,000 minimum exempt for Wealth Tax is also applied to the ITSGF calculation for non-residents (obligation real). This means that, for practical purposes, a non-resident’s Spanish net wealth typically needs to exceed €3,700,000 before a tax liability under the ITSGF arises.

Relationship with Wealth Tax (IP)

The Solidarity Tax is complementary to the Wealth Tax, meaning that any amount paid for the Wealth Tax in an autonomous community is deductible from the amount payable under the ITSGF. This mechanism prevents double taxation on the same assets. The ITSGF aims to harmonise the taxation of large fortunes, ensuring that even in regions with a 100% IP bonus, a certain level of tax is paid on high net worth.

ITSGF Tax Rates

The ITSGF applies a progressive tax scale to the net wealth exceeding the threshold. The state-wide rates are:

• Up to €5,347,998.03: 1.7%
• From €5,347,998.03 to €10,695,996.06: 2.1%
• Over €10,695,996.06: 3.5%

These rates apply to the portion of the net wealth that exceeds the €3,000,000 threshold, after applying the €700,000 exemption, and after deducting any Wealth Tax paid.

Valuation of New-Build Property for ITSGF

The valuation rules for new-build properties for the ITSGF are the same as those for the Wealth Tax, as it is a complementary tax that adopts the IP’s valuation methodology. This means the valuation will be the highest of the acquisition price, cadastral value, or reference value, and for properties under construction, it will be based on invested amounts plus land value.

Filing the Solidarity Tax Return

The ITSGF return is filed using Modelo 718. The official period for filing this declaration is typically from 1st July to 31st July of the year following the tax year (e.g., for the 2024 tax year, it would be filed in July 2025). Electronic submission is mandatory.

Implications for Foreign Buyers of New-Build Properties on the Costa del Sol

For foreign buyers investing in high-value new-build properties on the Costa del Sol, both the Wealth Tax and the Temporary Solidarity Tax require careful consideration:

• Asset Valuation: Ensure accurate valuation of your new-build property using the prescribed methods (acquisition price, cadastral value, or reference value) to correctly determine your tax base.
• Thresholds: Be aware of the €700,000 minimum exempt for Wealth Tax and the €3,000,000 threshold for the Solidarity Tax, which effectively means a liability often starts for net wealth above €3,700,000 for non-residents when considering the general exemption.
• Andalusian Context: While Andalusia’s 100% Wealth Tax bonus was attractive, the Solidarity Tax now plays a dominant role for large fortunes, ensuring a base level of taxation irrespective of regional IP policies.
• Filing Obligations: Regardless of whether a tax payment is due, you may still be obliged to file Modelo 714 for Wealth Tax if your net wealth exceeds €2,000,000. If your net wealth crosses the €3,000,000 threshold, filing Modelo 718 for the Solidarity Tax is mandatory.

It is advisable for foreign buyers to seek professional tax advice to navigate these complex regulations and ensure full compliance, especially given the dynamic nature of tax legislation in Spain.