Words: Ashley Rigg
Published: 22nd September 2011
*Spain slaps wealth tax on holiday homes
The Spanish government is to resurrect the wealth tax or patrimonio which was eliminated in 2008 in order to bring Spain into line with the rest of Europe.
The tax is to be paid on net assets above €700,000, which excludes an allowance of €300,000 for main residences but not holiday homes. The devil is in the detail however as the decision on the exact amount of the tax free allowances are devolved to regional governments.
Currently holiday home owners in Catalonia, Andalucia, The Valencian Community, The Balearics and The Canaries will have to pay partimonio on all net assets above 108,200 Euros, unless these are changed before the tax is introduced.
The move by the Socialist government could be a short term one as they are highly likely to lose the upcoming election. Unfortunately the main opposition, Partido Popular (PP) appear to be keeping its options open although they are publicly opposing the tax. The medium term result could be that PP keep the tax to help balance the books but blame the socialists for its introduction.
Comment
The argument being put forward is a familiar one: the wealthy should pay more than the “average Joe” to help the country get back on its feet. Property taxes meet two key principles of taxation: simplicity and fact they are hard to avoid.
However, this tax is unfair and not fit for purpose for a number of reasons:
- The holiday home industry has been disproportionately important to Spain’s economy (compared to other countries). The tax will discourage overseas investment and cost jobs in both tourism and property causing a decline in tax revenues.
- It’s a tax on savings – people with modest assets and common sense will begin putting their money into other European countries. As cash is sucked out of the country, the government will need to raise its borrowing costs to keep capital in Spain. Cue further tax rises. Anyway, surely the government should be encouraging saving at a time when over consumption based on credit was the root cause of the current situation?
- A big issue facing Spain is the glut of holiday homes – the tax as it stands is just illogical.
Meanwhile the government’s property road shows continue. They hit Hamburg last week with the aim to “recover channels of communication, distribution and sale with the main markets interested in holiday homes in Spain”.
Source: Global edge
User Comments
Now that the details are out we can see that the tax free allowances are much higher than before - €700,000 personal allowance and €300,000 allowance fro your main home, which means that potentially a couple could have €2million of assets without having to pay tax.
It is also important to remember that this tax doesn't just apply to holiday homes - it applies to all assets in Spain. It is equally important to remember that the rates of tax are generally low - (between 0.2% and 2.5%).
Peter Esders,
Chebsey & Co
I would like to point out that a very low number of holiday property owners have ever paid anything. I am talking about the area I know, south Tarragona.
I don't think to pay an average of 200 euros a year is out of the way.
I would have preferred no tax at all but .....
Manuel Rios,
Rivers Rios Property Services S.L.