SPAIN Law and Practice Contributed by: Álvaro Paniagua Rico and Borja López Pol, Anaford Abogados
1.5 Taxation of Real Estate Owned by Non- Residents and Non-Citizens Non-resident individuals who hold real estate in Spain will be taxed annually under the Spanish NRIT for merely holding the property. The amount due will depend on the cadastral value (an administrative value determined by the cadastral authorities mainly for the registrar and tax purposes) of the property. There is a reduced 19% tax rate for residents in the EU and a general 24% rate for resi - dents elsewhere. In addition, as previously mentioned, non-Spanish tax residents will be subject to the Spanish WT and Soli - darity Tax on properties located in Spain that they own as of 31 December each year. Depending on the intended use of the property and other relevant considerations, it may be advisable to assess the possibility of holding the assets through a corporate structure. 1.6 Stability of Tax Laws The autonomous communities in Spain have various competencies in the regulations of inheritance and gift tax, with some communities like the Community of Madrid or the Valencian Community standing out for applying a 99% tax reduction for transfers between family members of group I and II (which includes ascendants, descendants or adopted children and spouses). However, as has occurred with the wealth tax through the introduction of the temporary solidarity tax on large fortunes, the central government is proposing a reform of regional funding to harmonise the inherit - ance and gift tax. This reform seeks to establish a common minimum rate across all autonomous com - munities to eliminate disparities, such as the 99% tax relief mentioned. Nevertheless, this reform has not yet been activated by the central government.
ciencies in the upstream movement of funds in wealth structures. If certain requirements are met, this regime provides that: • dividends distributed between Spanish companies, as well as EU companies and non-EU companies with a tax treaty in force, may benefit from a 95% exemption; and • capital gains derived from the sale of subsidiaries may also benefit from a 95% exemption. Therefore, depending on a range of relevant factors, it may be advisable to consider holding the wealth structure through a holding company. It is important to assess whether all requirements for applying the participation exemption regime are met, especially the one regarding the business activities of the companies involved. 1.4 Pre-Immigration and Exit Planning There are several pre-immigration and exit planning opportunities available under Spanish tax law and advance planning is often essential to optimise an individual’s tax position. Prior to becoming tax resident in Spain, it is advisable to assess whether the individual may qualify for any of the special tax regimes described in 1.3 Income Tax Planning , such as the Beckham Regime or the so- called Mbappé Law, as eligibility is subject to specific conditions and, in some cases, strict timing require - ments. In addition, individuals should review the structure of their assets and any companies in which they hold an interest in order to determine whether the Family Business tax benefits discussed in 1.2 Exemptions may be available. Proper planning may significantly reduce exposure to wealth tax and the Solidarity Tax on Large Fortunes. Likewise, before ceasing Spanish tax residency, it is advisable to review the potential tax implications of the change of residence, including the possible appli - cation of exit tax rules and any restructuring or timing opportunities that may help mitigate the overall tax burden.
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