“Wealth tax is the bête noire of the Spanish system,” says expert

The SUR in English and Línea Directa seminar.
The SUR in English and Línea Directa seminar. / R. H.
  • Pedro Fernández of Garrigues law firm offered foreign residents important advice on the Spanish tax system

Tax expert Pedro Fernández of Spain's leading law firm Garrigues spoke to an audience invited by SUR in English and Línea Directa at the Home Fair in Marbella on Saturday.

Fernández ran through the different types of taxation foreign residents in Spain are liable to pay.

“Most have a view that Spain is a high tax country,” he said, “but with exception of the wealth tax, which is one the British find hard to understand, Spain does not have higher taxes than other EU countries.”

He described the Spanish wealth tax as the “bête noire” of the system explaining some of the rates payable and that the principle is that residents should only pay on the increase in wealth.

Fernández was keen to draw a line between tax planning - to make sure that no more tax is paid than necessary - and more aggressive strategies that the government is cracking down on with anti-avoidance provisions.

Inheritance tax is an issue that concerns many, especially older, residents and Fernández spoke of some of the differences between the Spanish system and those in other countries.

“No countries have the same rules for inheritance tax,” he said, “In some countries it's the estate that pays the tax. In Spain it's the heirs who pay.”

How much the heirs have to pay is complicated, he added, explaining that there are 15 brackets depending on wealth and degree of kinship. Fernández gave the example of a woman, with no living close relatives, who left her wealth to a man who helped her in her house. He ended up paying 73 per cent in tax.

“It is worth looking at with time,” said Fernández with regard to options available to residents to keep tax to a legal minimum.

He warned though that now that banks have to share information, it's easy for the tax authorities to find out about any attempts to hide wealth.

“The main asset today is data,” said Fernández.

Members of the audience were invited to continue chatting to the expert after the seminar over refreshments.