We have a tax in Spain which is levied on the net assets of
individuals, Impuesto sobre el Patrimonio –
net wealth tax (NWT) – for the purposes of which any
individual owning assets located, or rights which can be
exercised, in a Spanish territory is classed as a taxable
person by virtue of an in rem obligation.
In the case of investments made by non-resident individuals
who are the indirect owners of properties located in Spain
(owning them through companies resident abroad), there is some
doubt as to whether they may be classed as NWT taxable persons
under this in rem obligation.
A reasonable, overall interpretation of the pertinent rule
would be that interests in a foreign company are not subject to
NWT under this in rem obligation. This appeared to be
the understanding of the Directorate General of Taxes of the
Ministry of Finance of Spain (DGT) which, in its binding Ruling
V2982-11 of December 21 2011, concluded that:
"In cases of ownership by a
non-resident of shares in the capital of a foreign company in
turn owning, inter alia, the property located in
Spain, there is no subjection to Spanish wealth tax."
However, the DGT appears to have abandoned this reasonable
interpretation, in both recent double tax treaties and its
latest binding rulings.
The treaties signed most recently by Spain – with
Kuwait (Article 22.4), the UK (Article 21.4) and Germany
(Article 21.4) – include an anti-abuse rule that
applies in certain cases of indirect ownership of real estate.
The rule applies where the real estate is owned through
entities, at least 50% of whose assets, directly or indirectly,
are made up of real property located in a contracting
Similarly, following the amendment of the treaty with
Germany, the DGT has issued binding rulings (i.e. V0905-13,
V1452-14, V0093-16 and V3047-17) to individuals resident in
Germany forming part of ownership structures similar to that
described above (an individual resident in Germany who owns
100% of a German company with a majority shareholding in a
Spanish company with real property assets located in Spain).
The conclusion reached was that the requesting parties were
subject to NWT under the in rem obligation referred to
above and must declare the stakes held in the Spanish company
in which they had indirect ownership interests.
Also important is the DGT's response to binding ruling
request V4968-16 of November 16 2016, submitted by a Norway
resident, in which it referred to this type of property
structure and to the right of the Spanish tax authorities to
demand NWT from the ultimate owners on the basis of an in
rem obligation. In particular, the DGT stated in its
"It would be unfair discrimination, as well
as contrary to European Union case law, to apply to a Spanish
resident a treatment different from that applied to a
non-resident, both owning capital in a company resident in
Spain, whereby the former is taxed on their worldwide assets
and the latter is released from said tax simply because their
ownership is through an intermediate non-resident legal entity
In light of this recent administrative approach, it would be
advisable to review any ownership structures that are similar
to those described, and the position that owners are adopting
in relation to wealth tax based on an in rem
obligation. In any event, this administrative stance is
somewhat questionable, since tax treaties should not create,
per se, a taxable event for NWT purposes, and because
the DGT's interpretation of non-discrimination is not supported
by EU law.
Montse Mas (email@example.com) and Alberto