Application of the joint Personal Income Tax - Wealth Tax limit to non-resident taxpayers

Wealth tax and non-residents: new criteria from the Supreme Court

The Supreme Court has recently published two rulings (STS October 29th, 2025, and STS November 3rd, 2025) in which it pronounces on the functioning of the settlement of Wealth Tax for non-resident taxpayers who are subject to taxation in Spain by real obligation.

It should be noted that Spanish Wealth Tax regulation requires any individual, including non-residents, to pay this tax on the assets and rights they own when these are located, can be exercised or must be fulfilled in Spanish territory. 

Article 31.1 of the Wealth Tax Law establishes a limit for those who are tax residents in Spain, whereby the sum of the full amounts of wealth tax and personal income tax cannot exceed 60% of the personal income tax base (with some connotations), since, if this threshold is exceeded, the wealth tax liability can be reduced to a maximum of 80%, thus allowing a tax advantage in this tax. The purpose of this joint limit is to avoid double taxation, as this can be excessive.

However, this criterion set out in the previous paragraph has so far only been applied to taxpayer’s resident in Spain and not to non-residents, who are taxed in our country on a real obligation basis. Based on this new ruling, non-residents who are subject to taxation in Spain could also apply the limit set out in Article 31 of the WTL, considering the equivalent amount of income tax paid in their country of residence, to calculate the reduction in their wealth tax liability.

Delving deeper into one of the rulings, the appellant, a resident of Belgium, observes that the aforementioned provision is contrary to European Union law and points out that taxes cannot be confiscatory in nature, meaning that a limit must be set on the wealth tax rate to avoid such situations.

The appellant considers that the Spanish tax authorities have the necessary means to ascertain the income tax paid in Belgium, which would allow the tax liability to be limited. Therefore, the total amount of wealth tax payable, together with the personal income tax paid in this case in Belgium, may not exceed 60% of the sum of the latter's tax bases.

The situation of residents and non-residents can only be considered different when there are no means of obtaining the appropriate information to verify these tax liabilities.

The reason for this change in criteria lies in the need to avoid discrimination against non-resident taxpayers compared to resident taxpayers, which, according to the Supreme Court, is unjustified and violates the free movement of capital. The ruling states: "Habitual residence, whether in Spain or abroad, does not justify the different treatment given to residents and non-residents, whereby the latter are not subject to the full tax limit provided for in Article 31.1 of the Wealth Tax Law. This difference in treatment is discriminatory and unjustified.