Non-residents and Wealth Tax in Spain: the Supreme Court allows the joint income limit to be applied

The taxation of the assets of non-residents in Spain has for years been a somewhat complicated and, in many cases, counterintuitive issue. This is essentially because it combines two distinct areas: the Spanish tax system and European Union regulations.

In recent years, a very important question has arisen: whether a person who does not live in Spain but owns assets here (for example, one or more properties) can benefit from a reduction in Wealth Tax based on their income, just as residents do.

And this is no minor detail. Many non-residents own property in Spain, but do not always have a high income here. This can result in the Wealth Tax being relatively high compared to their actual financial situation.

The underlying issue: assets in Spain, but little income

To understand this better, let’s consider a simple example.

Wealth tax is levied on what you own (for example, a property). In contrast, income tax is levied on what you earn each year.

This can lead to situations such as this:

• A non-resident owns a property in Spain.
• They earn hardly any income in Spain.
• Their main income comes from their country of residence.
• Yet they still have to pay Wealth Tax in Spain.

The result may seem somewhat unfair: you pay tax on something you own, without necessarily having a high income to go with it.

The ‘combined limit’: the key concept

There is a mechanism known as the ‘combined limit’, which in practice serves to prevent the total amount of income and wealth tax from becoming excessive in relation to a person’s earnings.

Put simply:

If a person has a low income, the Wealth Tax may be reduced so that the total tax burden is not disproportionate.

However, this reduction has a limit: as a general rule, it cannot exceed 80% of the tax liability.

The idea is quite logical: if someone has limited financial means during the year, they should not have to bear an excessive tax burden simply because they hold assets.

And what about non-residents?

This is where the problem lay.

This benefit has traditionally applied to tax residents in Spain, as it is linked to Spanish personal income tax. However, non-residents do not pay Spanish personal income tax on their worldwide income, but rather in their country of residence.

This raised a significant question:

Can a non-resident apply this same limit if their income is in another country?

For years, the Tax Agency’s answer was no.

The European key: avoiding unjustified differences

However, European Union law introduces a very important principle: the free movement of capital.

In simple terms, this means that no unjustified obstacles may be placed in the way of a person from another EU country investing or owning property in Spain.

Therefore, the key point is not whether someone is a resident or not, but whether the difference in treatment is actually justified.

And this raises the question: if the aim of the limit is to avoid an excessive burden based on income, does it make sense to automatically exclude non-residents?

What the Supreme Court has recently ruled

In two judgments handed down in late 2025, the Supreme Court has taken an important step.

Essentially, it has confirmed that it is not correct to automatically deny this benefit to non-residents simply because they do not pay Spanish personal income tax.

Most significantly, the Court accepts that income from the country of residence (for example, Belgium in the case in question) may be taken into account when applying this limit.

In other words: it is not necessary to be a tax resident in Spain in order to assess whether there is a disproportionate tax burden.

What changes with this doctrine

Based on these rulings, the main idea is as follows:

• It is not enough to simply say, ‘They are a non-resident, so it does not apply’.
• One must look at the taxpayer’s actual circumstances.
• If the comparison with a resident is reasonable, the same criteria may be applied.

In other words, we are moving from a very formal approach (resident vs non-resident) to a more realistic one: how much the person earns and what tax burden they bear.

What a non-resident must prove

Although this doctrine is favourable, it does not apply automatically.

It will be necessary to provide information such as:

• that the person is a non-resident;
• what assets they hold in Spain;
• what their total income is;
• where that income is taxed;
• how all this affects the Wealth Tax liability.

In other words, one must demonstrate the actual financial situation, not merely claim it.

What this means in practice

For many foreign property owners in Spain, this may be relevant.

Especially if:

• they own a high-value property;
• their income is not very high;
• they have already been paying Wealth Tax in Spain.

In these cases, it may be worth checking whether this reduction applies.

Conclusion

The Supreme Court has paved the way for a more flexible interpretation that is better aligned with the economic reality of non-resident taxpayers.

The approach is no longer to automatically exclude those who do not live in Spain, but rather to assess whether there is genuinely a justified difference.

And, in many cases, this could lead to a significant reduction in the tax burden.

If you own assets in Spain and are a non-resident, it may be worth reviewing your situation in detail, as this approach could directly affect your tax liability.

If you would like to find out more about taxation for non-residents and related matters, or require personalised assistance, please do not hesitate to contact us or visit our IberianTax website.