Residency and Visas for Qualified Investors in Spain
December 1, 2023
The Supreme Court of Spain has recently handed down a ruling that has important implications for the deduction of mortgage charges.
The ruling limits the deduction of mortgage charges for these taxpayers, allowing deductions only if the secured debt was used to acquire or renovate the property.
In this article, we will discuss the implications of the judgment and what it means for non-residents who own property in Spain.
According to the Supreme Court’s judgment, non-residents who own property in Spain are not allowed to deduct the mortgage’s value from their assets and the tax on substantial fortunes unless the secured debt was used to acquire or renovate the property.
The court clarifies that debts related to the acquisition or investment in the property that determines that taxable event are not deductible from the value of the property.
The tax base for the wealth tax is determined by the difference between the value of the assets and rights held by the taxable person and the charges and encumbrances of a real nature.
However, the judges specify that the credit derived from the principal obligations is not the same as the guarantee of performance constituted with the mortgage.
Therefore, it is necessary to separate the debt from the mortgage guarantee, since they are two different rights, and the second one is accessory and in support of the first one, the mortgage charge is equal to the value of the debt.
The Supreme Court’s judgment has important implications for non-residents who own property in Spain.
Specifically, the debt secured with mortgage on the property whose ownership determines the subjection by real obligations to the Wealth Tax, when it has been destined to the acquisition of the good, to the investment in the same, cannot be deducted from its value for the purpose of determining the taxable base of the Wealth Tax by real obligations.
The Supreme Court’s judgment limiting the deduction of mortgage charges for non-residents who own real estate in Spain has significant implications. At
Employing In Spain, we are committed to providing our clients with the latest updates and information on tax law changes that may affect them.
If you have any questions or concerns about the implications of this judgment or any other tax-related matter, do not hesitate to contact us.
