Donald K. Says:
We understand that Spain has a wealth tax on worldwide assets. Is US real estate held in an LLC required to report to the Spain tax authorities? What are the penalties for failing to disclose all assets?
Global Diversification Expert Ted Baumann Says:
Hi Donald,
Assuming you are a Spanish tax resident, there is a wealth tax on global net assets.
Spain defines the net value of your wealth as “All assets and rights of economic content owned by a natural person deducting charges and encumbrances which diminish its value as well as personal debts and obligations.” Since a limited liability corporation is treated as a pass-through entity, it would be included under that definition.
However, the wealth tax does come with several allowances. The first one is that the first €700,000 of net wealth is excluded. You can also exclude €300,000 on your main home. Some Spanish regions offer even higher allowances.
Several categories of wealth are excluded altogether. In addition to the allowance for your house, you can also exclude household content, works of art and antiques, pension rights, property of a business that’s based on a professional activity like doctor or lawyer, intellectual rights, and shares in a company where you have an active role as a manager.
If you are not a Spanish resident but own property there, you would pay a wealth tax on Spanish assets only, with an allowance of €700,000 per person.
The rate for the wealth tax is progressive and varies between 0.2% and 3.5%. The tax rates are slightly different in Valenciana.
No, one thing to bear in mind is that under Spanish tax law, your combined wealth tax and personal income tax cannot exceed 60% of your taxable income. There are also opportunities to transfer liquid investments into Spanish tax compliant bonds which are not subject to wealth tax.
The Spanish tax authorities require that you report all overseas assets on Form 720. Potential penalties for failure to declare assets start at 50% of the amount of any discrepancy but can vary depending on the circumstances.
For comprehensive advice and support in international diversification, you can join my Global Citizen service.
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