New tax measures approved in Spain for 2022 and 2023

Wealth taxes: minimum top-up tax and indirect ownership

Two amendments that are relevant for foreign investors have been made to taxes on capital. In fact, both amendments highlight the importance for taxpayers to review their situation, as some specific limits and exemptions may apply.

First, a specific amendment has been made to the wealth tax applicable to nonresident individuals, who are only taxed on their assets located in Spain.

Before this amendment, the Spanish courts and tax authorities upheld that a nonresident individual who owns shares in a non-Spanish entity is not subject to wealth tax, even if the value of those shares arises from Spanish assets. Now, on the contrary, shares in foreign entities whose value mainly arises from Spanish real estate will be considered assets located in Spain, where they will be subject to tax as a result. However, domestic and treaty-based exemptions may apply.

Second, to raise additional revenue and harmonize wealth taxation among Spain’s autonomous communities, a new tax for high-net-worth individuals has been approved. Specifically, taxpayers whose net worth exceeds €3.7 million will be taxed on a worldwide basis, and nonresident taxpayers whose net worth exceeds €3 million will be taxed on their Spanish assets only.

Tax rates range from 1.7% to 3.5% (above €10.7 million); however, any wealth tax paid in Spain or abroad is creditable against this new tax. As this new tax works as a minimum top-up tax, this configuration is likely to only significantly affect resident taxpayers living in autonomous communities with attractive wealth tax regulations (e.g., Madrid and Andalusia) and nonresident taxpayers whose main assets are located there.

This new tax is foreseen as a two-year temporary measure, so in principle it will only be levied on a high-net-worth individual’s wealth between December 31, 2022, and December 31, 2023. However, the possibility of this tax being extended beyond this two-year period cannot be ruled out.

New tax regime for carried interest

From January 1, 2023, the tax treatment of carried interest (i.e., the additional remuneration paid to managers of private equity and venture capital funds in compensation for their successful management) is regulated in line with the provisions in the legal systems of neighboring countries and of the chartered community of the Basque Country.

Specifically, carried interest qualifies as employment income (part of the general tax base of the personal income tax and subject to rates of up to approximately 50%) but can be entitled to a 50% rebate (i.e., only 50% of the income is included in the general tax base). This treatment will apply to income obtained directly or indirectly from shares and other rights—including success fees—that grant special economic rights to specific entities, provided certain requirements are met.

Extension of impatriate regime’s scope

Several amendments have been made to the impatriate regime to make moving to Spain an attractive option for employees, professionals, entrepreneurs, and investors residing abroad. This regime allows individuals who become tax residents in Spain to pay only nonresident income tax for the year they move and for the following five years, with certain nuances. Consequently, rather than being taxed on a worldwide basis, such individuals are subject to tax on their Spanish-source income and capital gains only, except for income obtained from employment and entrepreneurial activities (which is taxed on a worldwide basis). The main new developments, which will take effect from January 1, 2023, are aimed at enabling a larger number of taxpayers to be eligible for the special regime as well as changes regarding migration to promote international remote working.

By Martí Adroer
Cuatrecasas
Barcelona, Spain