Wealth Tax in Madrid: Rebate, Large Fortunes Tax and Filing
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Wealth tax in Madrid (Impuesto sobre el Patrimonio) is one of the subjects that most concerns investors and high-net-worth residents. The Community of Madrid has applied a 100% rebate on the tax due since 2008, but the introduction of the Temporary Solidarity Tax on Large Fortunes (ITSGF) changed how it works from 1 January 2023.
This guide, based on information published by the Community of Madrid and the Spanish Tax Agency, explains what the tax covers, how the rebate applies today, how the taxable base is calculated and which returns must be filed.
What wealth tax is and who pays it
Wealth tax applies to the net wealth of individuals as at 31 December each year: the sum of their assets and rights of economic value, less charges, encumbrances, debts and other personal obligations for which they are liable.
It is a strictly individual tax: joint filing is not possible. For a married couple, assets, rights and debts held in common under the matrimonial property regime are attributed half to each spouse, unless a different share is proven.
The tax accrues on 31 December. A death on any other date therefore does not give rise to the tax for that year: the estate’s assets are taxed as part of the heirs’ own wealth, and they are not required to file a return on behalf of the deceased.
The Community of Madrid’s rebate
Since 2008, the Community of Madrid has applied a 100% rebate on the wealth tax due (Law 3/2008, article 20 of the consolidated text approved by Legislative Decree 1/2010). With that general rebate, the obligation to file a return applied only to those whose assets and rights exceed €2,000,000 in value.
It is, however, important to take account of the recent development described below.
The Solidarity Tax on Large Fortunes and its effect
The ITSGF is a national tax that complements wealth tax. According to the Spanish Tax Agency, it applies to the net wealth of individuals when it exceeds €3,000,000, accruing on 31 December each year. It is filed exclusively online (form 718).
With effect from 1 January 2023 (Law 12/2023), and for as long as the ITSGF remains in force, the general 100% rebate does not apply. In its place, a regional rebate applies, equal to the difference, if any, between the wealth tax due (after the combined limit) and the ITSGF due (after its own combined limit).
According to the Community of Madrid, the general effect of this formula is that ITSGF taxpayers are effectively taxed under wealth tax, so that the ITSGF due is reduced to zero. Because every situation is different, we recommend having your case reviewed by a tax adviser.
How it is calculated: personal allowance, debts and combined limit
The taxable base is the value of non-exempt assets and rights, less deductible charges and debts. The personal allowance is then deducted; according to the Community of Madrid it is €700,000.
Deductible debts: only where duly documented; interest is never deductible.
Combined limit: the wealth tax due, together with income tax, cannot exceed 60% of the sum of the income tax taxable bases. If it does, the wealth tax due is reduced by up to a maximum of 80%.
What counts as wealth: property, art, vehicles and insurance
Treatment varies by type of asset, which bears directly on wealth planning:
Household effects: generally exempt, except for jewellery, luxury furs, vehicles, boats and aircraft, which are declared at market value on 31 December.
Works of art and antiques: those that do not meet the exemption requirements of the law are valued at market value on 31 December.
Bank accounts: taken at the higher of two values, the balance on 31 December or the average balance for the last quarter.
Life insurance: at surrender value on 31 December.
Pension plans: vested rights are exempt.
Usufruct and bare ownership: subject to specific valuation rules. Our guide to bare ownership explains the mechanism.
Assets needed for a professional activity and certain shareholdings may qualify for exemptions, subject to strict conditions, including management functions and remuneration.
How to file: forms 714 and 718
The wealth tax return must be filed electronically, using the web form for form 714. The ITSGF is filed using form 718, available exclusively in electronic format from the Tax Agency, with identification via Cl@ve, a certificate or electronic ID.
Property wealth in Madrid: decisions to plan ahead
When property makes up a significant part of your wealth, an up-to-date real estate appraisal in Madrid makes it easier to analyse the whole and take decisions. It is also useful when assets are passed on: our article on inheritance tax in Madrid explains the 99% rebate for direct heirs.
The Community of Madrid has applied a 100% rebate on the tax due since 2008. From 1 January 2023, and for as long as the ITSGF is in force, that general rebate is replaced by a regional rebate calculated as the difference from the ITSGF due. ITSGF taxpayers are, in general, effectively taxed under wealth tax.
What is the personal allowance?
According to the Community of Madrid, it is €700,000.
Can a married couple file jointly?
No. The tax is strictly individual; assets held in common are attributed half to each spouse, unless a different share is proven.
Which forms must be used?
Form 714 for wealth tax and form 718 for the ITSGF, both filed electronically.
At BARNES Madrid we support owners and investors with their property decisions: confidential valuation, purchase, sale or reorganisation of their assets. To speak to our team, contact BARNES Madrid or request a property valuation.
We welcome you at 15 Calle Velázquez, in the heart of the Salamanca district.
The information in this article is indicative, is drawn from data published by the Community of Madrid (last updated 12 May 2026) and the Spanish Tax Agency, and does not replace personalised tax or legal advice.
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