Wealth Tax in Spain

Spain's wealth tax (including the solidarity tax introduced in 2022) is a levy on individual assets that differs from the global norm of income taxation (like personal income tax). In other words, regardless of income level, the more wealth one has, the more tax one pays—this is a blatant "rich person's tax." We believe that wealth tax will gradually supplement or even replace income tax in the future.

Increasingly, people criticize the current system of income tax for favoring the wealthy. Wealthy individuals have multiple income streams and can easily avoid unfavorable taxes by reducing high-tax income (like salaries) while increasing low-tax income (like dividends). In contrast, the poor cannot do this, as most of their income comes from salaries, which are subject to high income taxes. Conversely, wealth tax is an effective means of redistributing wealth, as the rich cannot escape taxation on their accumulated wealth, regardless of how they structure their income (after all, would anyone forgo wealth just to save on taxes?).

Interestingly, while the wealth gap is widening globally, only a handful of countries implement a wealth tax. Among the OECD member countries (an alliance of developed nations), only five impose a wealth tax (including Spain). Even outside the OECD, there are very few countries that have implemented wealth taxes, such as Argentina, Bolivia, and Colombia.

This explains why the general public in China often discusses when the country will introduce inheritance and gift taxes, but rarely mentions wealth tax, despite the fact that wealth tax impacts the wealthy more significantly than inheritance tax, as the former is levied annually while the latter is a one-time tax.

We believe that implementing a wealth tax in China aligns more closely with Chinese cultural values than introducing inheritance and gift taxes. Chinese people value family and legacy; imposing tax costs on family wealth transfers would likely provoke significant social backlash. In contrast, a wealth tax aimed at addressing income inequality could be more readily accepted by society and also provide a stable revenue source for the government. Most importantly, an increasing number of international institutions and organizations recommend that countries adopt wealth tax systems to address current fiscal challenges. For instance, the G20 will discuss global wealth tax in November 2024. Therefore, it is essential to study Spain's wealth tax to understand the tax systems we may face in the future.

This article primarily draws from the 2020 report titled "Wealth Tax: Spain" produced by the UK Wealth Tax Commission. This report provides an in-depth analysis of Spain's wealth tax, helping us understand this unique form of taxation. Following the release of this report, Spain's inheritance tax was also revised, and this article will update relevant content accordingly.