Direct Taxes

Tax on Wealth and Large Fortunes (AFHZ) (2017 Campaign)

Repealed and replaced by property tax (IP) from the 2018 campaign

Type of Tax

Direct

Collected by

Provincial Government

Paid by

Natural persons

Tax base

Goods and rights of an economic nature, minus any encumbrances or liens that reduce their value, and with the deduction of the personal debts and obligations for which there is liability.

Abatements in the base

Reduction of € 700,000. See abatements in the summary table 2017

Net tax base

Calculated by subtracting the corresponding abatements from the tax base (see summary table 2017).

Tariff or Rate

See net tax base rate in the summary table 2017

Liability

Calculated by applying the tax rate to the net tax base.

Deductions and Allowances

See deduction for taxes paid abroad and allowances in the summary table 2017

Amount payable

Calculated by subtracting the corresponding deductions and allowances from the tax liability.

Since financial year 2013, it has been mandatory to declare Wealth and Large Fortune Tax. This tax is direct and personal and is levied on the wealth of natural persons. It accrues on 31 December of each year and is levied on the wealth owned by the taxpayer on that date. The tax is collected by the Provincial Government of Gipuzkoa.

By way of of Customary Law 6/2015 and with effect from 1 January, 2015, several important changes have been made to the Tax on Wealth and Large Fortunes. See summary of the reform

On June 20, 2018, came into force, the new Customary Law 2/2018, of June 11, of the Wealth Tax, which repeals the Customary Law 10/2012, of December 18, of the Tax on Wealth and Large Fortunes.

What is this tax levied on?

The wealth of the natural person, the entirety of the goods and rights of an economic nature they possess, minus any encumbrances or liens that reduce their value, and deducting any personal debts and obligations for which same is liable.

Who is required to declare this tax?

Residents in Gipuzkoa who are in the following circumstances are required to sign up to and declare this tax:

  • When the net tax liability, calculated in accordance with the regulatory rules governing the tax, is positive (to be paid in).
  • When the value of his or her goods and rights, including those exempt from tax, and determined in accordance with the regulatory rules of the tax are greater than 3 million euro.

When they reside outside the territory of Gipuzkoa but the goods are in Gipuzkoa, there is a 'real obligation' (tax liability by virtue of property, assets, etc. maintained in the tax jurisdiction) to declare the tax and it will be applied as follows.

How is the amount payable calculated?

Goods:

  1. Tax Base: The taxpayer must declare all goods and rights of an economic content owned by him/her deducting the personal debts and obligations for which he/she is liable. The persons listed in the table are exempt from the charging of this tax: Goods and rights exempt from taxation.
  2. Abatements in the base: €700,000 abatement in the following cases:
    • In all cases of personal obligation (residents in Gipuzkoa).
    • In cases of ‘real obligation' (residents outside Gipuzkoa, with goods in said historical territory) provided that they meet the assigned conditions.
  3. Net Tax Base: Calculated by subtracting the corresponding abatements from the tax base.
  4. Tariff or Rate: Percentage to be applied to the net tax base. To determine the percentage to be applied, see Net tax base rate
  5. Liability: Calculated by applying the corresponding tax rate to the net tax base.
  6. Deductions: The lesser of the following two quantities:
  7. The amount paid abroad by reason of a charge of an analogous nature to this tax.
  8. The result of applying the average rate of this tax to the portion of the net tax base taxed abroad.
  9. Items related to activities provided that these are exercised habitually, personally and directly and constitute the main source of income.
  10. Shares and holdings in certain organisations provided that a series of conditions are met.
  11. Allowances: After the values of the following goods have been added to the base, an allowance of 75% of the portion of the total tax liability corresponding to those values shall be applied.
  12. Amount payable:  Calculated by subtracting the corresponding deductions and allowances from the tax liability.

Example

Xabier, a 62-year-old salesman resident in Zumaia, has assets worth €4,000,000 including his usual home and the retail premises where he works. The former is valued at 500,000€ and the latter at €650,000. He also has to meet a debt of €100,000 to pay another property he owns.

  1. Total assets: 4,000,000€
  2. Exempt assets: 650,000€ (retail premises where he works)
  3. Tax base: Because the value €3,350,000 is greater than €3,000,000, Xabier has a personal obligation to declare this.
  4. We subtract his debts: 3,350,000 - 100,000 = €3,250,000
  5. For his usual home we subtract a maximum amount of €300,000: 3,250,000 - 300,000 = 2,950,000€
  6. Abatements in the tax base: €700,000 abatement.
  7. Net tax base: 2,950,000 - 700,000 = €2,250,000€.
  8. Rate: to calculate the rate, go to the €1,500,000 row. The amount to be paid on this is 7,250€. The rest (2,250,000€ - 1,500,000€ = 750,000€) is taxed at 1%, which is 7,500€ (750,000€ x 1%)
  9. Total tax liability = 7,250 + 7,500 = €14,750€
  10. Deductions: In this case there are no deductions.
  11. Amount payable: 14,750€

Time to get working!