It is a relatively rare tax system, but it is still used in various countries throughout the world, such as France, Spain, and Portugal, and if you are a UK resident living in one of these countries you may be liable to pay wealth tax. If you own assets in France, Spain, or Portugal but live in the UK, this could also make you liable to pay wealth tax.
The rates and thresholds of wealth taxes vary from country to country, with different capital assets taken into account by different nations’ tax systems.
What is wealth tax?
A wealth tax is a tax that is levied on assets owned by an individual, as opposed to income tax, which is levied upon annual income earned.
Proponents of the system argue that it is fairer than income tax, as it takes into account inherited wealth, and is a fundamentally redistributive system—that is to say that it goes some way to reducing the financial gap between society’s rich and poor. Critics argue that wealth taxes are unfair as they tax the same asset over and over again, instead of only taxing new financial transactions.
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How is wealth tax calculated?
Wealth tax is typically calculated by adding up the market value of all the assets an individual or household owns, minus any allowances, and then imposing a direct tax based upon that value.
There will usually be a threshold, below which no wealth tax is levied, which varies a lot from country to country, and often subsequent thresholds that progressively increase the percentage of tax owed.
What are the different wealth tax rates?
Wealth tax rates vary from country to country, and also vary depending on factors such as residential status. For example, wealth tax in Spain for non-residents is calculated differently than it is for residents.
Wealth tax vs. income tax: what’s the difference?
Income tax is levied on an individual or household’s annual income, i.e. all money they earn within a given tax year. Wealth tax is levied against the total value of an individual or household’s assets, such as property, vehicles, jewellery, and other expensive items. Exactly which assets are subject to a wealth tax, and the exact wealth tax valuation rules, vary from country to country.
How much is wealth tax in different countries?
The French wealth tax
The French wealth tax, modified in 2018, is payable by all households resident in France with worldwide real estate assets worth over €1.3 million. If you are not resident in France the tax is only imposed if you own French property with a value totalling over that same amount.
Prior to 2018, the French wealth tax was much more overreaching, and took into account other assets such as savings, vehicles, jewellery, and other high-value items.
Please note that the French wealth tax is levied on households, not individuals, and therefore is calculated based on the combined assets of an individual, their spouse or partner, and children under the age of 18. Children of adult age are treated as a separate household for the purposes of the French wealth tax, even if they are treated as part of your household for French income tax purposes.
The French wealth tax rates are as follows:
|Sum total of household wealth||Wealth tax rate|
|0 – €800,000||0%|
|€800,000 – €1.3 million||0.5%|
|€1.3 million – €2.57 m||0.7%|
|€2.57m – €5m||1%|
|€5m – €10m||1.25%|
|€10m or more||1.5%|
The Spanish wealth tax
Spanish tax law is highly regionalised, and so Spanish wealth tax rates vary a lot between different regions. Taking that into consideration, we will set out only national wealth tax rates below, with the occasional notable local exception. It is highly recommended that you investigate the exact situation in the region in which you reside. Non-Spanish residents are subject to the national rates.
The Spanish wealth tax has been in place since 2011, affecting all Spanish residents with worldwide assets totalling €700,000 or more in value (€500,000 in Catalonia), or non-residents with Spanish assets over the same value.
As well as property, assets taken into account by the Spanish wealth tax include jewellery, cars, yachts, planes, fur coats, antiques, art, intellectual property rights (unless held by the author), and life insurance. Certain assets are exempt from the Spanish wealth tax, including household items not specified in the previous list, essential business goods (if the business is the individual’s main source of income), certain shares, and certain assets of historical or cultural significance.
Spanish residents have a tax-free allowance of €700,000, plus an extra €300,000 allowance for the individual’s permanent place of residence. This extra €300,000 is combinable for married couples, resulting in a maximum total tax-free allowance of €2 million for an individual and their spouse.
In Spain there is a limit to how much an individual can pay in tax per year. The sum total of income and wealth taxes cannot exceed 60 per cent of an individual’s total taxable income.
As previously stated, Spanish wealth tax rates vary by region, but here are the national rates (beyond the exemption threshold):
|Total wealth beyond the exemption threshold||Wealth tax rate|
|€0 – €167,129||0.2%|
|€167,129 – €334,253||0.3%|
|€334,253 – €668,500||0.5%|
|€668,500 – €1,336,999||0.9%|
|€1,336,999 – €2,673,999||1.3%|
|€2,673,999 – €5,347,998||1.7%|
|€5,347,998 – €10,695,996||2.1%|
|€10,695,996 or more||2.5%|
The Portuguese wealth tax
The Portugal wealth tax is levied on Portuguese property with a value totalling €600,000 or more, regardless of whether an individual is resident in Portugal or not. The tax-free allowance can be combined with that of your spouse, amounting to €1.2 million for a married couple.
The Portugal wealth tax operates on fairly simple terms, with 0.7 per cent being levied on personally owed properties valued between €600,000 and €999,999, and 1 per cent on portfolios valued at €1 million or more. Properties owned by a company are taxed at the lower rate of 0.4 per cent.
Other global wealth taxes
Other countries that have implemented some form of wealth tax include India (taxed at one per cent), Norway (taxed at roughly 0.85 per cent), Argentina (taxed at 0.75 per cent), Switzerland (taxed at various rates depending on the district, but not exceeding 0.94 per cent) and Canada (levied on high value properties at rates between 0.2 and 0.4 per cent).