Most of our international clients know about Modelo 210 and imputed income tax. Far fewer know that Spain also has an annual wealth tax – the Impuesto sobre el Patrimonio – and that it applies to non-residents as well, based on your position on 31 December each year.
The reassuring news is that the great majority of people who own an ordinary holiday home on the Costa Blanca fall below the threshold and neither pay nor file. The important news is that the Valencian Community has just changed its rules.
What is taxed – and what is not
As a non-resident you pay wealth tax only on assets located in Spain (what Spanish law calls obligación real): the property, Spanish bank accounts, shares in Spanish companies. Your home abroad, your pension savings and your accounts in your own country are not part of the Spanish tax base.
Debts directly connected to the Spanish assets are deductible. If you have a mortgage on the Spanish property, the outstanding balance reduces the base.
The property is not valued at market value
This is where most people go wrong. The property is not taken at what an agent says it is worth today, but at the highest of three figures:
- the cadastral value (valor catastral),
- the value determined or verified by the tax authorities for other taxes, and
- the acquisition value – the price you actually paid.
Because cadastral values on the Costa Blanca are normally well below market value, in practice it is almost always the purchase price that governs. A property bought for €300,000 and worth €450,000 today is declared at €300,000.
€700,000 – per person, not per property
The state exempt minimum is €700,000 per taxpayer. That single detail settles most cases: if you and your spouse own the property 50/50, each of you has your own allowance, which in practice gives a couple €1,400,000 before any tax arises at all.
Example. A Nordic couple owns a villa in Alfaz del Pi bought for €600,000, with €200,000 still outstanding on the mortgage. The net value is €400,000, so €200,000 each. Both are far below €700,000 – no wealth tax and no filing obligation.
The other side. A sole owner of a villa bought for €2,100,000 with no mortgage has a base of €2,100,000. After the allowance, €1,400,000 is taxed on a progressive scale starting at 0.2%, and a return must be filed.
What is new: the Valencian Community has raised its minimum to €1,000,000
By Ley 5/2025 of 30 May, the Valencian Community doubled its own exempt minimum from €500,000 to €1,000,000, with effect for tax accruing from 31 December 2025 onwards.
Why this matters to a non-resident: since the 2021 reform, a taxpayer assessed under obligación real may apply the rules of the autonomous region where the greatest value of their Spanish assets is located. If your only Spanish property is in Alfaz del Pi, Altea or Benidorm, that region is the Valencian Community.
One honest caveat. The regional provision is drafted by reference to taxpayers habitually resident in the region, and whether a non-resident owner can use the higher €1,000,000 figure rather than the state €700,000 has to be assessed case by case. The state allowance is the safe starting point. If you are anywhere near the line, it is worth a conversation before the return goes in.
Filing: Modelo 714
Wealth tax is filed electronically on Modelo 714, normally between April and the end of June of the following year. You must file if the tax payable is positive or if the value of your Spanish assets exceeds €2,000,000 – and that second threshold is measured on gross value, without deducting debts. So an owner with €2,200,000 of Spanish property and a €1,700,000 mortgage pays nothing but still has to file.
And if your Spanish wealth exceeds €3 million
Then the Impuesto Temporal de Solidaridad de las Grandes Fortunas – the solidarity tax on large fortunes – also comes into play. Despite the word “temporary” in its name, it has been extended indefinitely. It is filed on Modelo 718 in July, and the wealth tax you have already paid is deductible against it. If you are approaching that level, plan well ahead.
What we recommend
Check three things: what you actually paid for the property, how ownership is recorded in the title deed, and how much is left on any Spanish mortgage. In nine cases out of ten those three figures decide whether the question arises at all. And keep in mind that wealth tax is an entirely separate matter from the annual imputed income return on Modelo 210 – that one is due however modest the property.
If you want to run the numbers on your Spanish property, our free tools are here: purchase costs and imputed income tax.
Contact us
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Phone: +34 629 549 430
Web: www.colas-abogados.com
This article is general information and does not replace individual legal advice.