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The essentials
For years people have repeated that in Madrid there is no wealth tax. That is not accurate. It is a state tax, direct and personal in nature, regulated by Law 19/1991 and applied across Spain: it taxes the net wealth of individuals, meaning the value of their assets and rights with an economic content, minus the charges and encumbrances that reduce their value and the debts each taxpayer is liable for (art. 1). It covers the whole of Spanish territory except the Basque Country and Navarre, which have their own regimes (art. 2). Each autonomous region can use the regulatory powers granted by the law on ceded taxes to set its own tax-free allowance, rates and rebates. Madrid, for example, has set its own allowance and approved a rebate on the tax due. The tax is still there; what changes is how much you pay.
That difference matters for two reasons. First: the duty to file the return does not depend only on whether there is a tax bill to pay. If the gross value of your assets and rights exceeds two million euros, you must file even if the rebate brings the tax due to zero. Second: since 2023 it sits alongside the temporary solidarity tax on large fortunes, a state tax that no region can rebate, and that has forced Madrid to change its rebate for as long as the solidarity tax lasts.
We handle this subject within our team of tax lawyers in Madrid. We work with people who hold significant assets (property, investment portfolios, shares in the family company, savings insurance) and want to know three things: whether they must file, how much the tax really weighs in their case and what legal planning is possible. If you have just arrived in Spain under the special tax regime for inbound workers, we cover that on our Beckham Law page, and if your question is where you pay tax, on our page about tax residence. Expats and other new arrivals often come to us for advice on residency and the Spanish tax system before they move, and non-residents with a holiday home or investments in Spain come to check what they owe.
These are two different taxes on the same thing, net wealth on 31 December. The key is how one is deducted from the other. Knowing both before you take investment or residency decisions helps you plan your future tax position.
An illustrative example, without the joint cap or other deductions: a Madrid resident with 5,000,000 euros of net taxable wealth has a taxable base of 4,300,000 euros in both taxes. Under the state scale, the wealth tax due would be around 53,500 euros and the ITSGF around 22,100. Madrid’s rebate covers the difference, so the taxpayer pays about 22,100 euros to the Community of Madrid and, once that payment is deducted, the solidarity tax due falls to zero.
Do you live in Spain, hold more than two million in assets and not know whether you must file Form 714?
These are the amounts that decide whether you file and how much you pay. All are measured on the accrual date, 31 December (art. 29 of Law 19/1991).
700,000 euros
tax-free allowance that Madrid deducts from the taxable base of its residents
source: art. 19 of Legislative Decree 1/2010 of the Community of Madrid
2,000,000 euros
gross value of assets and rights above which you must file even if the tax due is zero
source: art. 37 of Law 19/1991
60 % y 80 %
cap on the sum of income tax (IRPF) and wealth tax due, measured against the IRPF taxable base; the reduction of wealth tax cannot exceed 80%
source: art. 31 of Law 19/1991
3,000,000 euros
net wealth above which the solidarity tax applies
source: art. 3 of Law 38/2022
The work starts long before the income tax campaign. The return is filed at the same time as the income tax return (art. 54.3 of Law 22/2009), but the snapshot that counts is the last day of the year. We handle the whole process for our clients.
1
Property, accounts, funds, listed and unlisted shares, life insurance, vehicles, art, loans granted and debts, with the ownership of each item according to your matrimonial property regime (art. 7 of Law 19/1991).
2
Property at the highest of cadastral value, verified value and acquisition value; accounts at the balance on 31 December or the average balance of the last quarter if higher; listed shares at their fourth-quarter average; insurance at its surrender value (arts. 10, 12, 15 and 17).
3
Main home up to 300,000 euros, pension plans, household furnishings and, if the requirements are met, a business or shares in a family company (art. 4).
4
Wealth tax with the tax-free allowance that applies to you (in Madrid, 700,000 euros), the joint cap with income tax, the regional rebate and, in parallel, the solidarity tax with its own cap.
5
Electronically through the Spanish Tax Agency’s online office, in the form and within the period set each year by a ministerial order published in the BOE (the Official State Gazette), which usually coincides with the income tax campaign.
6
If a request arrives or a valuation check is opened, we reply and, if we disagree, we appeal. The route is the economic-administrative one and then the courts (art. 40 of Law 19/1991).
Planning means choosing, within the law, how assets are organised. Hiding assets or simulating transactions is something else, and that is for our tax crime lawyers in Madrid.
Shares in companies are exempt if the company carries on a genuine economic activity, you hold at least 5% of its capital (or 20% with your family group) and one of you performs management functions with pay that exceeds 50% of your earned and business income (art. 4.Ocho.Dos). The exemption only covers the part of the value that corresponds to assets used in the business, and the regulations spell out the requirements.
When your assets yield little, the 60% cap can cut the tax due considerably. We review which income counts and which assets fall outside the calculation because they produce no income.
Only documented debts can be deducted, and never those that financed exempt assets (art. 25). Community property is attributed half to each spouse unless another share is proven (art. 7), so we check how each asset is registered to make sure it is not declared twice or in the name of the wrong owner.
If the aim is to pass assets to your children, we coordinate it with gift tax and inheritance tax in your region (in Madrid, the Community of Madrid’s gift tax), because what leaves your estate stops being taxed here.
The sooner you tell us, the more room we have
With this documentation we prepare the inventory, the valuation and the calculation of the two amounts due:
The rebate reduces the tax due, but it does not remove the formal obligation. With gross assets above two million euros you must file Form 714, even if there is nothing to pay.
A region cannot rebate a state tax. With more than 3,000,000 euros of net wealth, it is worth running the full calculation every year, because its extension has no end date.
A company with too much cash, or rented property with no real economic activity, can lose the exemption in whole or in part. It is checked before 31 December, not in June.
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2
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Anyone who is a tax resident in Spain is liable under personal liability, on their worldwide assets; non-residents are liable under real liability, only for assets located in Spain. In Madrid, because of the regional rebate, in practice only those who exceed the solidarity tax threshold pay.
In Madrid, 700,000 euros per taxpayer, the same as the state figure. It is deducted from the taxable base after applying the exemptions, including the main home exemption up to 300,000 euros.
You file if there is a tax bill to pay or if the value of your assets and rights, before deducting debts, exceeds 2,000,000 euros. In Madrid the second condition is the one that most often applies, because the tax due is usually rebated.
Yes. It was created for two tax years, but a provision of Royal Decree-Law 8/2023 extended it until the taxation of wealth is reviewed within the reform of regional financing. It still applies today.
The Community of Madrid has not approved its own scale, so the taxable base is taxed under the state scale in article 30: eight brackets running from 0.2% to 3.5% from around 10.7 million euros. The regional rebate is then applied to the resulting tax due.
The sum of the income tax due and the wealth tax due cannot exceed 60% of the income tax taxable base. If it does, the wealth tax due is reduced, but never by more than 80%.
When the company does not manage movable or real estate assets, your shareholding reaches 5%, or 20% with your close family, and one of you manages it and earns more than half of their income from doing so.
You are taxed where you have your habitual residence on 31 December under income tax rules, and the difference between regions is large: in Catalonia, for example, the tax-free allowance is 500,000 euros and there is no general rebate. A change of region made mainly to pay less tax has no effect, and the law presumes there was no change in certain cases if the new residence does not last three years (art. 28 of Law 22/2009).
We have six offices in Spain (Madrid, Barcelona, Sevilla, Málaga, Córdoba and Palma de Mallorca) and we also work with clients online.
