💸 Tax Residency: Where You Live in Spain Drastically Affects Your Wealth Tax
One of the most immediate and significant ways Spain’s decentralized tax system impacts residents is through the Wealth Tax (Impuesto sobre el Patrimonio). Since Autonomous Communities have vast power over this tax, the amount you pay can vary from zero to tens of thousands of Euros depending on your official tax residence.
The tax is levied annually on net worldwide assets above a set exemption threshold (globally, the State sets this at a minimum of €700,000, plus an additional €300,000 exemption for the main residence).
📊 Wealth Tax: Regional Exemptions and Bonuses
The key differences are driven by the CC.AA.’s ability to apply a Regional Bonus (Bonificación) to the final tax bill.
| Region | Regional Tax-Free Allowance (Exemption) | Regional Bonus / Relief | Effective Impact on Wealth Tax |
| Madrid | €700,000 | 100% Bonus | Effectively Zero |
| Andalusia | €700,000 | 100% Bonus (in place since 2022) | Effectively Zero |
| Extremadura | €700,000 | 100% Bonus (in place since 2023/2024) | Effectively Zero |
| Galicia | €700,000 | 50% Bonus | Significantly Reduced |
| Catalonia | Lower at €500,000 | Generally applies high regional rates | Highest in Spain (before Solidarity Tax) |
| Navarre (Foral) | Own rules: €550,000 | No general bonus | High rates |
| Balearic Islands | Raised to €3,000,000 | No general bonus | High rates only for very large fortunes |
| Region of Murcia | Raised to €3,700,000 | No general bonus | Effectively zero for most taxpayers |
Disclaimer: The rules for Wealth Tax and the related Temporary Solidarity Tax on Large Fortunes (ITSGF) are currently complex and subject to change. The Solidarity Tax (for assets >€3 million) applies across Spain, including regions with a 100% Wealth Tax bonus, but the amount paid in regional Wealth Tax is deductible from the national Solidarity Tax.
2. The Foral System Impact on Wealth Tax
The Foral territories of the Basque Country and Navarre operate under entirely separate rules:
- Navarre: Sets its own minimum exemption (€550,000) and its own progressive tax scale, which is typically higher than the national minimum.
- Basque Country: Each of the three historical territories (Álava, Biscay, and Gipuzkoa) sets its own rates and exemptions. They are also generally considered to have higher effective rates than the “tax-free” Common Regime regions.
🔑 Why This Matters: Choosing Your Tax Domicile
For expats and high net-worth individuals moving to Spain, the choice of where to establish your tax residence (domicilio fiscal) is the single most important financial decision.
While tax-free regions like Madrid and Andalusia may seem highly appealing, remember that your tax domicile is determined by where you spend more than 183 days a year, or where your “center of vital interests” (main economic and family ties) is located. Simply owning property in a low-tax region is not enough; you must genuinely reside there.
