Innovations in the Wealth Tax for Non-Residents:
- Application of the tax regulations of the Autonomous Community where the greatest value of the assets are located.
- Application of the combined Personal Income Tax and Wealth Tax limit. Tax Shield.
Introduction
If you own real estate or financial assets in Spain but reside abroad, the Wealth Tax (IP) is a tax obligation that you must understand thoroughly. Until very recently, this tax has created a situation of legal defenselessness: non-resident taxpayers paid significantly more than their Spanish counterparts for equivalent assets, solely because they lived outside our borders.
Two historic Supreme Court decisions, handed down on October 29 and November 3, 2025, have put an end to this discrimination. These rulings represent a turning point in the taxation of non-residents and open a clear avenue for recovering incorrectly paid income from the past four years. The impact is especially relevant in communities such as Madrid, the Balearic Islands, and Andalusia, where the presence of non-resident assets is considerable.
In this guide, we will analyze the legislative and case law innovations that transform the way non-residents are taxed on their Spanish wealth, the practical implications of the so-called “fiscal shield,” and how to claim amounts paid incorrectly in previous fiscal years.
Who Is Obligated to File the Wealth Tax as a Non-Resident?
Definition of Non-Resident and Real Tax Obligation
A taxpayer is considered a non-resident for the purposes of the Wealth Tax when they do not have their habitual residence in Spanish territory. For these taxpayers, the so-called real tax obligation applies, which means they only pay tax on assets and rights located in Spain—not on their worldwide assets, unlike residents.
This distinction is fundamental. While a resident declares their entire wealth (homes abroad, international investments, cash in foreign banks), a non-resident declares exclusively assets located in Spanish territory.
What Assets Are Included in the Taxable Base?
Non-residents must include the following assets in their Wealth Tax return: real property located in Spain (residential properties, commercial premises, land); shares and holdings in Spanish companies; bank accounts in Spanish entities; usufruct rights over Spanish assets; Spanish vessels and aircraft; Spanish investment funds; and securities listed on Spanish stock exchanges.
When Does the Obligation to File a Return Arise?
Non-residents must file a return if: (1) the total tax payable is positive after applying deductions, bonuses, and the new combined limit, or (2) gross assets exceed €2,000,000, even if the resulting tax is zero after applying bonuses. Filing is done via Form D-714 electronically with the State Tax Administration Agency (AEAT).
The Exemption Threshold and Applicable Tax Rate
Exemption threshold for non-residents
The exemption threshold is €700,000. If the net value of assets located in Spain does not exceed this amount, there is no tax obligation. Practical example: a non-resident owner of a property valued at €750,000 only declares €50,000 of net wealth (€750,000 – €700,000). The tax rate is applied to that amount.
State Tax Scale
Since 2021, the IP has a progressive scale with rates from 0.2% to 3.5%, depending on the net taxable wealth. However, since 2021, non-residents have the right to apply the tax regulations of the Autonomous Community where the greatest value of their assets is located, in accordance with Additional Provision 4 of Law 19/1991.
The “Fiscal Shield” Revolution: Combined IRPF and IP Limit (2025 Innovation)
What is the combined limit under article 31.1 LIP?
Article 31.1 of the Wealth Tax Law establishes an anti-confiscatory mechanism that for decades was exclusive to fiscal residents in Spain. This limit functions as a “fiscal shield” that prevents combined taxation under Personal Income Tax (IRPF) and Wealth Tax (IP) from becoming disproportionate. The rule is simple: the sum of the total tax quotas of the IRPF and the Wealth Tax cannot exceed 60% of the taxable base of the IRPF. If this sum were to exceed 60%, the IP tax quota is automatically reduced, with a maximum reduction of 80% on the total IP tax quota.
The Historical Precedent: Supreme Court Decisions 4849/2025 and 4846/2025
For more than 30 years, the Spanish Tax Administration applied this limit only to residents, denying its benefit to non-residents on the argument that these did not pay IRPF tax in Spain. The Supreme Court, in its decisions of October 29, 2025 (ECLI:ES:TS:2025:4849) and November 3, 2025 (ECLI:ES:TS:2025:4846), has definitively confirmed that this interpretation was discriminatory.
The established doctrine is unequivocal:
“Habitual residence, whether in Spain or outside it, does not justify the different treatment given to residents and non-residents, consisting of the fact that the latter are not entitled to benefit from the limit on the total tax quota provided for in article 31.1 of the Wealth Tax Law. This difference in treatment is discriminatory and is not justified.”
This case law doctrine is binding on all Spanish courts in accordance with article 93.1 of the Administrative Dispute Resolution Act.
Legal Basis: Free Movement of Capital (art. 63 TFEU)
The Supreme Court bases its decision on the consolidated case law of the Court of Justice of the European Union, particularly in the judgment of September 3, 2014 (case C-127/12), which declared contrary to article 63 of the TFEU (free movement of capital) a tax regime that discriminated between residents and non-residents.
It reasons that preventing non-residents from applying the combined limit: (1) reduces the value of assets in Spain for non-residents compared to residents, (2) discourages cross-border investment, and (3) does not pursue compelling reasons of general interest that are justified. Moreover, it rejects the argument of “lack of information”: the information exchange mechanisms between Tax Administrations allow for complete verification of IRPF paid in the country of residence.
Application of the Combined Limit According to Residence: Intra-EU vs. Non-EU Residents?
No formal difference since 2021
Since the 2021 reform, both intra-EU non-residents (EU/EEA) and non-EU residents have the same rights and obligations with respect to the Wealth Tax. Both can: apply the tax regulations of the Autonomous Community where the greatest value of assets is located; benefit from the combined limit under article 31.1 LIP; and claim refunds of incorrectly paid amounts.
Intra-EU non-residents (EU/EEA)
For a non-resident in an EU Member State, the application of the combined limit is more direct. Spain has signed Double Taxation Conventions with practically all European countries, which contain non-discrimination provisions. These conventions expressly recognize the taxpayer’s right to credit the tax quotas paid in the other State for purposes of applying combined limits.
Non-EU non-residents
For non-residents outside the EU, the accreditation of equivalent IRPF depends on whether Spain has signed Double Taxation Conventions. When no bilateral convention exists, accreditation is still possible through documents certified by the foreign Tax Administration, although it requires greater procedural diligence.
Within the great discrimination by the Spanish Tax Agency against non-residents, it has always been especially so against non-EU residents. As an example, among many others, we highlight that even after the regulatory reform in 2021, it was not until this year that the Central Administrative Tax Court in its Resolution of September 24, 2025 (res. 2959/2023) allowed the non-EU non-resident to apply the regulations of the Autonomous Community where the greatest value of the assets is located. However, it is important to know that amounts wrongly paid can be claimed.
Autonomous Community Application: Bonuses and Special Regulations
Which Autonomous Communities have a 100% bonus?
Since 2015 (for intra-EU residents) and 2025, non-residents can apply the tax regulations of the Autonomous Community where the greatest value of their assets is located. Two communities lead in fiscal attractiveness:
Madrid:
- 100% bonus on the total IP tax quota
- Automatic application: It is not an option, it is an obligatory right
- Consequence: Although they must file a return if gross assets > €2,000,000, they do not pay anything at all for IP
Andalusia:
- 100% bonus since 2022, with the same application as Madrid
Exception: The Temporary Great Fortunes Solidarity Tax (ITSGF)
Since 2022, there is a new tax that taxes net assets not exempt exceeding €3,700,000. For taxpayers in this category, the 100% bonus on IP does not apply. Instead, there is a new special bonus consisting of the difference between the total IP tax quota and the total ITSGF tax quota.
Practical Calculation of the Fiscal Shield: Numerical Example
Let us analyze a case to illustrate the impact of the 2025 Supreme Court decision.
Scenario: Non-resident residing in Belgium, owner of real property in Barcelona (Catalonia, with no 100% bonus). IP taxable base: €5,000,000 – €700,000 = €4,300,000.
Calculation BEFORE (Without fiscal shield):
- Total IP tax quota (Catalonia, approx. rate of 2.5%): approx. €107,500
- Amount paid: €107,500 (without combined limit)
Calculation NOW (With fiscal shield TS 2025):
- Total IP tax quota: approx. €107,500
- IRPF taxable base in Belgium (2024 income): €80,000 (e.g.: real estate income)
- IRPF quota in Belgium (IPPTA, approx. 45% marginal): approx. €36,000
- Sum of quotas: €107,500 + €36,000 = €143,500
- Limit of 60% of IRPF base: 60% × €80,000 = €48,000
- Excess: €143,500 – €48,000 = €95,500
- Reduction on IP quota (maximum 80%): €107,500 × 80% = €86,000
- New IP quota: €107,500 – €86,000 = €21,500
Result: Pays €21,500 instead of €107,500. Savings: €86,000 per year. Over 4 years (2021-2024): Potential savings of €344,000, plus interest on late payments.
How to Claim Refunds of Incorrectly Paid Amounts?
Claim Period: Last 4 Years
You can claim taxes paid incorrectly in the last 4 years. This means:
- IP fiscal years 2024, 2023, 2022, 2021: Correctable and claimable
- IP fiscal years 2020 and earlier: Barred by time, but potentially recoverable through grounds of absolute nullity.
Method 1 – Correction of Self-Assessments (Ordinary Procedure)
A request for correction is submitted to the AEAT, stating: (1) the number of the receipt for the original self-assessment, (2) the correct calculation of the combined limit, (3) proof of the IRPF paid in the country of residence by means of a certificate from the foreign Tax Administration.
The AEAT must resolve within 6 months. The amount to be refunded includes late payment interest in accordance with the General Tax Law.
Method 2 – Review of Acts That Are Absolutely Null and Void (for Barred Fiscal Years)
For fiscal years 2020 and earlier, an exceptional avenue exists. The Supreme Court has accepted that administrative acts that deny the combined limit incur absolute nullity in accordance with article 217.1.a) of the General Tax Law, because they violate constitutional principles (articles 14 and 31 of the Spanish Constitution) and fundamental rights derived from European Union law.
Who Has Authority? AEAT vs. Autonomous Communities
Tax Source Assigned to Communities but with State Authority for Non-Residents
The Wealth Tax is assigned to the Autonomous Communities for residents. However, for non-residents, authority is: AEAT (State) for the self-assessment and management of the tax; Autonomous Communities for the application of their tax regulations if the non-resident chooses to apply them.
The correction request must be submitted to the AEAT at the state level.
Frequently Asked Questions (FAQ)
Is the Combined Limit Automatic or Must I Request It?
After the 2025 Supreme Court decisions, it is a right that you can and should apply in your self-assessment. If in previous years you did not apply it, you can claim correction.
Do I Have to Prove That I Have Paid IRPF in My Country?
Yes, you must accredit the tax quotas on income tax equivalent in your country of residence by means of a certificate from the Tax Administration of that country.
Is the Combined Limit Applied in the Same Way for Intra-EU and Non-EU Non-Residents?
Formally, yes, since 2021. But in practice, the Tax Authority only recognizes the limit to intra-EU non-residents on the pretext of belonging to the European Union and the existence of Double Taxation Conventions. The Tax Authority will force non-EU residents to litigate by denying them the application of the limit until the courts recognize the right.
What Is the Maximum Period to Claim?
4 years for ordinary correction. For barred fiscal years (2020 and earlier), there could be an avenue through absolute nullity without a time limit, although more complex.
In Case of Having to Pay the Great Fortunes Temporary Solidarity Tax (wealth > €3,700,000), How Does the Calculation Change?
The 100% bonus on IP does not apply. Instead, there is a special bonus. The combined limit applies to both taxes in a combined manner.
Recent Legislative Changes and Future of the Tax
Pending Constitutional Appeal
There is a constitutional challenge to the Wealth Tax admitted for proceedings by the Constitutional Court in April 2021, which will likely be resolved in the first quarter of 2026. It is probable that the Constitutional Court will rule in line with the Supreme Court decisions (2025), consolidating the application of the combined limit to non-residents in a definitive manner.
Why Trust Martínez-Cardós to Manage Your Claim?
Proven Experience with Non-Residents
Our firm has spent more than 45 years specializing in the taxation of non-residents in Spain. We have managed hundreds of cases of foreign taxpayers holding real property, financial, and business assets in Spanish territory. In our professional practice, we have systematically observed how the AEAT unjustly denied bonuses granted to non-residents such as the combined limit or the ability to benefit from the regulations of the Community where the greatest value of assets and real property is located, generating confiscatory settlements that clearly violated European Union law.
Proven Success
We have a high success rate in all kinds of procedures for non-residents exceeding 95%, according to established case law criteria. We are convinced that once the AEAT is confronted with the doctrine of TS 4849/2025 and 4846/2025, it will automatically recognize the right to refund in the vast majority of cases. But only by filing a claim will the refund be obtained.
Beyond the Procedure: Comprehensive Tax Optimization
We do not just file mechanical corrections. We design comprehensive tax strategies for future years: planning the structure of asset holdings; analysis of autonomous community bonuses and relocation of assets to Autonomous Communities with lower tax burden; optimization of taxable base (deductions, charges, liabilities); and coordination with double taxation conventions to avoid double taxation.
Defense Against Inspections and Requests
If the AEAT challenges your correction or opens a verification procedure, we have specialists in tax litigation with experience in non-resident cases before Administrative Tax Courts, National Courts, and the Supreme Court.
CONCLUSION
The Supreme Court decisions of October 2025 mark a before and after in the taxation of non-residents under the Wealth Tax. The fiscal shield of article 31.1 LIP is no longer a privilege of residents, but a fundamental right for all taxpayers, regardless of where they reside.
If you have paid IP in Spain without applying the combined limit in the last four years, you have an opportunity to recover significant amounts through correction and claiming refunds. The process is accessible, you have solid case law on your side, and the AEAT is already beginning to accept these claims. Act quickly: the statute of limitations is running, and the oldest fiscal years (2020 and earlier) require more complex procedures.