Questions regarding wealth tax —informally referred to as “luxury tax”— using the Valencian Community as an example.

Wealth Tax in the Valencian Community: the first EUR 500,000 are exempt, and, in addition, the taxpayer’s main residence is exempt up to a maximum amount of EUR 300,000.

Taxable base

The taxable base is the value of the taxpayer’s net wealth. This amount is calculated as the algebraic difference between the total gross assets and all deductible debts.

The different assets and rights forming part of the taxpayer’s wealth must be valued by applying the specific valuation rules established in the Wealth Tax Law, depending on the nature of each asset or right.

For Wealth Tax purposes, deductible debts include real charges and encumbrances that reduce the value of the corresponding assets or rights, as well as personal debts and obligations for which the taxpayer is liable. They may only be deducted if they are duly substantiated, and interest may not be deducted under any circumstances.

The existence of exempt assets must be taken into account, subject to the requirements established in the Wealth Tax Law and in Royal Decree 1704/1999 of 5 November, which sets out the requirements and conditions for business and professional activities and shareholdings in entities for the application of the relevant Wealth Tax exemptions. Accordingly, the following are exempt:

Assets forming part of Spanish Historical Heritage that are registered in the General Register of Assets of Cultural Interest or in the General Inventory of Movable Property, as well as those classified as Assets of Cultural Interest by the Ministry of Culture and registered in the corresponding register.

Assets forming part of the historical heritage of the autonomous communities.

Certain works of art and antiques.

Household goods.

Economic rights in the following instruments:

Consolidated rights of participants and economic rights of beneficiaries in a pension plan.

Economic rights corresponding to premiums paid into insured pension plans as defined in Article 51.3 of the Personal Income Tax Law.

Economic rights corresponding to contributions made by the taxpayer to social welfare plans regulated in Article 51.4 of the Personal Income Tax Law.

Economic rights arising from premiums paid by the taxpayer under collective insurance contracts, other than corporate social welfare plans, which implement pension commitments assumed by companies, in accordance with the first additional provision of the Law regulating Pension Plans and Funds and its implementing regulations, as well as those arising from premiums paid by employers under such collective insurance contracts.

Economic rights corresponding to premiums paid into private insurance policies covering dependency, as defined in Article 51.5 of the Personal Income Tax Law.

Rights arising from intellectual or industrial property, provided that they remain part of the author’s assets and, in the case of industrial property, provided that they are not assigned to an economic activity.

Securities owned by non-residents whose income is exempt pursuant to Article 14 of the Non-Resident Income Tax Law, approved by Royal Legislative Decree 5/2004 of 5 March.

Business and professional assets.

Shareholdings in certain business and professional entities.

The taxpayer’s main residence, up to a maximum amount of EUR 300,000.

Taxable amount after allowances

To determine the taxable amount after allowances for taxpayers resident in the Valencian Community, the taxable base must be reduced by the amount of the tax-free allowance, which amounts to:

Full tax liability

The applicable tax rate for taxpayers resident in the Valencian Community is determined by applying the following tax scale to the taxable amount after allowances: