Paying taxes in Spain (II)

To continue with the tax topic comparison across places we look at couple more taxes that you may want to be careful with as are not standard across countries but can add up. For this, we look again at Spain, which looks like is going a bit nuts with the taxes (specially when you add all other ones, I need to do a summary comparison):

• Wealth tax (Impuesto del Patrimonio), i.e., tax not only the income but also the overall wealth (even after one already paid taxes on). If you live in the country, all your wealth across the world is included. If you are not resident, then only the wealth in Spain is counted. (Check retirement plans as you may be able to exclude those, like 401k). This is actually not only for high wealth individuals and it applies on anything beyond ~$500k for any resident of Spain (spends there more than 183 every year). On top of that, it is not homogeneous across communities... Here is a breakdown for communities. To see the difference, having 4M Euros would cost you 0 in Madrid but ~40k in Catalonia. Note: this is currently (as of 2018) a temporary tax that is extended yearly by the government. One day they may not but I wouldn't count on it for many years plus there is always the risk of being brought back (it has been extended yearly for already 7 years or so...). For instance, as mentioned, on Madrid is zero, but it is almost a given that a change on local government (from right to left) would immediately increase this. 
• The way to compute it in Catalonia is:
• Add all your wealth
• Subtract up to E300k for the value of your permanent residence
• Subtract E500k (exemption rule). In other parts of Spain is E700k but in Catalonia...
• Apply the following table:
  
• So, for instance, say you got E2M and live in a E200k place. The "Base Imponible" is 1.8M, but in Catalonia the first 500k are exempt, and as such, the "Base liquidable" is 1.3M. Looking at the table above, the first 668449.75 pay 2632.21 and the rest (1.3M - 668449.75 = 631550.25) pay at 0.945% = 5968.15. Hence, you got to pay a total of E8600 that year.
• Important: there is a note saying that there is a cap on how much you pay on taxes in relation to your overall income "Exclusivamente para los sujetos pasivos sometidos al impuesto por obligación personal, la suma de la cuota íntegra del Impuesto sobre el Patrimonio conjuntamente con las cuotas del IRPF (cuota íntegra general y cuota íntegra del ahorro) no podrá exceder del 60 por 100 de la suma de las bases imponibles, general y del ahorro, del IRPF." Examples:
• Say that, following with the example above, you make 50k/yr and pay 10k on taxes on that money. 60% is 30k. As (E8600+E10k)<30k, you got to pay the E8600 for patrimonio (full amount).
• Say that you make only 10k and that falls below the tax line, so, no tax pay. 60% of 10k is 6k < 8600 so you are paying 2600 more than you should. So, you got to actually pay E6000. 
• There is actually a limit on how much you can deduct from that tax. For instance, say that you made zero Euros that year. Then you would be paying 8600 too much, but they don't allow you to avoid paying all those. You can only remove 80% of the 8600 = 6880E. I.e., you still have to pay E1720.
• There is also a tax on real state if you are not living on it and has no rental gains either (say that you keep the place there as second residence): https://www.strongabogados.com/impuestos-no-residentes.php That's actually my case (where I own a condo in Barcelona). Looks like I got to pay for the condo 24% of 1.1% of the value of the place (if it was reviewed in the last 10 years, which it was). The good part is that the official value of the place ("valor catastral") is usually not as much as the market value of the place. And yes, that includes the parking spot. (you got to file twice, one for the flat and one for the parking spot):
• Use form 210. Most of it is straightforward. Remember to pay only for the days that you were owner of the place. For instance, if you buy the place on March 23, then declare 284 days out of 365. For instance: 284*88749.24/365 = 69054. 
• To fill the form 210, follow these instructions. The form is in here (under "predeclaracion" as you fill that and then take it to the bank). It's filled on the browser and then generates a pdf to bring to the bank. You can actually export it and next year you just import it, change the dates and generate a new one. Also when you take it to the bank, you can print double sided. The bank will give you back one of the forms stamped for your records.
• For those who think that I could put it as AirB&B, actually you can't without a municipal license, which the city doesn't give anymore.
• Beckham Law: a bit of good news... this is a regime within the Spanish tax law for foreign hires, which applies for the first 5 years a similar tax structure to the non-residents: flat income tax at 24% (applies only to Spanish income) and excludes overseas wealth tax. In fact, you don't even have to submit the 720 (declaration of overseas wealth). See more here and here.

Overall I do believe that wealth unbalance is a bad thing. Unfortunately, these laws seem to be less about balancing wealth (given the relatively low limits they are applied to) and more about getting more money into the coffers of the government (which honestly, is extremely wasteful... that would be a different post). Certainly those individuals, specially those with no ties to Spain, may want to take this into account when looking for places to invest or to retire to.

Cheers!

PS.: US-Spain tax treaty explained

PS2.: If you are a Spain resident, don't forget to declare your goods outside the country with model 720.