PURCHASE OF LUXURY PROPERTIES AND WEALTH TAX IN ANDALUSIA

Do you own an expensive property in Andalusia and want to know if you need to pay Wealth Tax? Malaga is leading in Spain in the number of purchase of luxury properties and Marbella is the municipality with the largest number of transactions. Over the last two years, there has been a greater number of foreign buyers of luxury homes in Andalusia, specifically around the Costa del Sol.

Thinking about these foreign buyers interested in purchasing luxury properties or properties with much higher than average prices, we’ll attempt to clarify the current situation in Andalusia in terms of Wealth Tax.

What is the current status of the market for luxury homes in Spain?

A luxury home is considered a home purchased for over 2 million euros. We’ll start with the following data about the property market in terms of the purchase and sale of luxury homes: in 2022, these sales grew 55% in Spain compared to 2021 and, in the first half of 2023, they have grown 30% compared to the same period in 2022. Over the last year, the value of these properties has grown by 13%.

Purchase of expensive properties by foreign buyers

Without a doubt, these sales have a high international profile and we are referring to investment clients with a foreign nationality. Likewise, non-EU buyers with American, British, Chinese or Russian nationality, for instance, have displayed an interest in this market.  This is due to the possibility of applying for a Golden Visa once they have completed their property investments. 

Who is liable to pay Wealth Tax in Andalusia?

Resident or non-resident individuals, who own assets and rights with a net value exceeding 2 million euros in Andalusia, are required to file a return. From 1 January 2022, the tax value of property is calculated based on the cadastral reference value (so not the cadastral value), published by the Ministry of Finance through the Cadastre.

How much is paid in Wealth Tax in Andalusia?

In Andalusia, since 2022, the rate for this type of tax is subsidised at 100%. This means that no one pays Wealth Tax in Andalusia. It’s important to note that, even though nothing is currently payable for this tax, the requirement to file an annual Wealth Tax return still applies.

Taxpayers must comply with this annual tax obligation. Once the annual return for this tax is submitted, the resulting tax would be reduced in its entirety and, in every case, taxpayers will pay zero euros. 

Where is Wealth Tax lowest in Spain?

Currently, Andalusia and Madrid are the autonomous communities with the lowest tax burden for large buyers or property investors in Spain. Both communities have introduced a Wealth Tax reduction of 100%.

In Spain, some Autonomous Communities have entered a tax “battle” to attract large purchases and foreign investment, especially in the real estate market and the purchase of properties. Andalusia and Madrid are at the lead of tax reductions, compared to other communities.

What is the new national tax on large fortunes?

In July, Spain introduced a special tax on large fortunes. This tax has been created so that taxpayers who do not pay Wealth Tax in their Autonomous Communities pay this new tax.

New national tax next to Wealth Tax

A return for this tax must be filed in Andalusia and Madrid by:

• residents with assets valued at over 3,7 million euros (because of a 700.000 euro exemption)
• non-residents with assets valued at over 3 million euros

This always refers to the net value of the assets and applies per person. However, this tax has a lower tax impact compared to Wealth Tax in other Autonomous Communities in Spain, as the minimum amount exempt from taxation is higher than that of Wealth Tax.

Legal and tax advice from C&D Solicitors

Advice on the purchase and sale of properties, from an independent lawyer specialising on this matter, is very important to guarantee your investment and avoid surprises during the conveyancing process or later on.

If you are thinking about buying a home in Andalusia, don’t hesitate to contact our firm, C&D Solicitors in Malaga, and we’ll be glad to help you and guide you on this matter, always safeguarding your interests and position as buyer. We can assist you in English, Dutch, Swedish, German and French.

Author: Gustavo Calero Monereo, lawyer/CEO at C&D Solicitors, Torrox, Malaga (Andalusia)