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EN Many Swiss retirees preparing to move to Spain focus primarily on tax residence, the second pillar or health insurance. However, one issue is often overlooked until it becomes a concrete problem: wealth taxation.
Unlike Switzerland, where wealth tax is levied at cantonal level and is relatively predictable, Spain applies a multi-level system: regional wealth tax, a national tax on very large fortunes, and specific reporting obligations for certain assets held abroad.
For Swiss retirees who have withdrawn their second-pillar capital, sold property in Switzerland or kept investments there, this system can have a significant impact if it is not anticipated.
The principle: Spain taxes the worldwide wealth of tax residents
Becoming a Spanish tax resident does not only change how income is taxed. It can also change the tax base used for wealth taxation.
A Spanish tax resident is generally taxed on their worldwide net wealth: bank accounts, securities, investments, real estate and other assets, whether they are located in Spain or abroad.
A non-resident, by contrast, is generally taxed only on certain assets and rights located in Spain.
This is why the date on which Spanish tax residence begins — already a key issue for the Swiss second pillar and tax residence — can also have a direct impact on wealth taxation.
Impuesto sobre el Patrimonio: a tax that depends heavily on the region
The Impuesto sobre el Patrimonio, generally referred to as IP, is Spain's wealth tax.
At state level, the system notably provides for:
- a general tax-free allowance of €700,000 per taxpayer;
- an exemption of up to €300,000 for the main residence;
- a progressive tax scale, with rates increasing according to the level of taxable wealth.
These rules must nevertheless be analysed carefully, because Spain's autonomous communities have significant powers regarding wealth tax.
They may, in particular, modify the tax-free allowance, the applicable tax scale or introduce specific reductions and tax credits.
As a result, the tax burden for the same level of wealth can vary significantly depending on the autonomous community in which the taxpayer is resident.
For someone with substantial wealth, the choice of region in Spain is therefore not only a question of climate, property prices or lifestyle. It can also have tax consequences.
Impuesto Temporal de Solidaridad de las Grandes Fortunas
In addition to the Impuesto sobre el Patrimonio, Spain also applies the Impuesto Temporal de Solidaridad de las Grandes Fortunas, commonly abbreviated as ITSGF.
This tax targets the highest levels of net wealth and generally concerns taxpayers whose net wealth exceeds €3,000,000.
The tax scale is progressive and can reach several percent for the largest fortunes.
One of its purposes is to reduce differences resulting from wealth-tax reductions granted by certain autonomous communities.
For Swiss retirees who have accumulated substantial wealth in Switzerland, withdrawn pension capital and purchased property in Spain, it is therefore necessary to look at their overall wealth rather than considering each asset separately.
Modelo 720: a reporting obligation, not a tax
The Modelo 720 is not a tax. It is an information return concerning certain assets and rights held abroad by Spanish tax residents.
The reporting obligation may notably concern three broad categories:
- bank accounts held abroad;
- certain securities, investments and financial rights held abroad;
- real estate and certain rights relating to property located abroad.
The general reference threshold is usually €50,000 per category.
For Swiss retirees, this may notably include bank accounts kept in Switzerland, securities portfolios or property still owned in Switzerland.
Certain financial assets or rights arising from Swiss pension arrangements may also require specific analysis depending on their legal and tax characteristics. It is therefore advisable not to assume automatically that a pension asset is or is not subject to Modelo 720 without checking the specific situation.
Does Modelo 720 have to be filed every year?
No, not necessarily.
Where a reporting obligation exists, Modelo 720 must be filed between 1 January and 31 March of the following year.
After the first declaration, however, it is not automatically necessary to submit a new Modelo 720 every year.
A new declaration may notably become necessary if a previously declared category of assets increases by more than €20,000 compared with the last declaration filed, or if certain previously reported assets or rights are sold, closed or otherwise changed.
The penalty regime for Modelo 720 was substantially reformed after the Court of Justice of the European Union ruled that certain penalties under the former system were disproportionate.
The reporting obligation itself nevertheless remains fully applicable.
The main risk for a new Spanish tax resident is therefore often discovering too late that certain assets retained in Switzerland should have been reported.
Why this issue should be anticipated before moving
Exposure to wealth tax depends on several decisions that are already part of a Switzerland → Spain relocation project:
- the date on which Spanish tax residence becomes effective;
- the autonomous community chosen for residence;
- the timing and amount of any second-pillar withdrawal;
- whether property in Switzerland is retained or sold;
- whether bank accounts or investments are kept in Switzerland;
- the purchase of property in Spain.
These elements should not be analysed separately.
A decision regarding the Swiss second pillar or the timing of Spanish tax residence can change the composition of a person's wealth at the point when Spain begins to take it into account.
Conversely, significant exposure to wealth tax may influence the timing or structure of the relocation project itself.
The amounts and thresholds mentioned in this article are provided for guidance only. Rules, tax rates, tax-free allowances and regional reductions may change and differ between autonomous communities. An up-to-date review is therefore necessary before making any important decision.
Common mistakes
- failing to realise that worldwide wealth may become relevant once Spanish tax residence begins;
- choosing a region in Spain without checking its wealth-tax rules;
- withdrawing a substantial amount of second-pillar capital without analysing its impact on total wealth;
- keeping bank accounts, securities or property in Switzerland without checking Spanish reporting obligations;
- discovering Modelo 720 only after moving instead of including it in the relocation timetable;
- considering wealth tax independently from tax residence and the Swiss second pillar.
The Switzerland → Spain strategic audit as a way to clarify wealth-tax exposure
At Immo Matas Suisse, the Switzerland → Spain strategic audit makes it possible to include wealth-related issues in the overall analysis of the relocation project, alongside tax residence, the Swiss second pillar, health insurance and administrative procedures.
The aim is not to replace a tax return or specialised tax advice, but to identify potential issues relating to wealth and the timing of the move early enough.
This allows the client to determine which questions should be clarified with a tax adviser, a Spanish specialist or another professional before important decisions are made.
Discover the Switzerland → Spain strategic audit
Frequently asked questions
Does Spanish wealth tax also apply to assets that remain in Switzerland?
Yes, in principle. For a Spanish tax resident, wealth taxation may apply to worldwide net wealth, including certain assets held in Switzerland.
From what level of wealth can the tax on large fortunes apply?
The statutory reference threshold for the Impuesto Temporal de Solidaridad de las Grandes Fortunas is €3,000,000 of net wealth.
The actual calculation nevertheless depends on the applicable exemptions, the composition of the person's wealth and any Impuesto sobre el Patrimonio already paid.
Is Modelo 720 a tax?
No. It is an information return relating to certain assets and rights held abroad.
Does Modelo 720 have to be filed every year?
No, not automatically. After the first declaration, a new filing may notably become necessary when certain increase thresholds are exceeded or when the situation of a previously declared asset or right changes.
Does the region where you live really affect wealth tax?
Yes. Spain's autonomous communities have significant powers regarding tax-free allowances, tax scales and reductions. The actual tax burden can therefore vary considerably from one region to another.