Spain: Wealth tax and property indirectly owned by non-residents

Spain: Wealth tax and property

A court decision addresses the treatment of property in Spain, for wealth tax purposes, when indirectly owned by non-residents through foreign entities.


The Superior Court of Justice of the Balearic Islands (Tribunal Superior de Justicia de Baleares) rejected the position of the tax authorities and held that the wealth tax (impuesto sobre patrimonio) does not apply with regard to property in Spain (including the Balearic Islands, the largest of which is Mallorca (Majorca)) when the ownership of the Spanish property is indirectly held by non-residents through foreign entities. The case identifying information is: 621/2020.


Under the 1991 wealth tax law, individuals who are not residents of Spain are liable for wealth tax in respect of any assets they own, where located, and rights that may be exercised in Spain.

Non-residents are thus subject to wealth tax on any real estate directly owned by them in Spain. The 1991 law makes no provisions for the indirect ownership of real estate.

Transferrable securities located or exercisable in Spain are subject to non-resident wealth tax.

Double taxation treaties

Certain income tax treaties in Spain’s network of tax treaties (including the tax treaties between Spain and Germany, Saudi Arabia, Armenia, Egypt, Slovenia, France, Georgia, India, Iceland, Israel, Kazakhstan, Kuwait, Luxembourg, Mexico, Moldova, Norway, Panama, United Kingdom, South Africa, Uruguay, and Uzbekistan) contain a provision regarding wealth tax and the indirect ownership of property. The treaty provision generally grants sovereignty to tax the indirect ownership of real estate properties to the country where the property is located.

The clause appearing in the applicable treaties that defines instances of indirect ownership of real estate generally provides:

Capital constituted by shares or other rights in a company or any other body of persons, deriving more than 50% of their value directly or indirectly from immovable property situated in a Contracting State may be taxed in the Contracting State where the immovable property is situated.

Prior rulings from tax authority (DGT)

In binding rulings V 4968-16 (concerning Norway) and V 0905-13 (concerning Germany), the DGT ruled that it is sufficient that the applicable treaty provides for the possibility of taxing indirect ownership for wealth tax purposes when non-residents own real estate in Spain through foreign entities.

Court decision and new approach

The Superior Court of Justice of the Balearic Islands rejected the interpretation in the DGT’s prior rulings, and instead held that properties owned indirectly via non-resident entities do not give rise to liability for wealth tax purposes regarding non-residents who hold real property in Spain by means of indirect ownership through foreign entities. The court observed that the Spanish wealth tax law does not expressly implement the authority for taxation granted by an applicable treaty.

Read a February 2021 report (Spanish) [PDF 137 KB] and (English) [PDF 134 KB] prepared by the KPMG member firm in Spain

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