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MONEY

Spanish bank accounts: Why you shouldn’t leave them inactive for too long

Not using a bank account you have in Spain can cost you dearly in the long run, with both the country's tax agency and your bank having the right to take all or some of your money. Here's what you need to know.

Published: 29 October 2020 13:14 CET
Updated: 12 September 2023 17:18 CEST
Spanish bank accounts: Why you shouldn't leave them inactive for too long
Why you shouldn't leave your Spanish bank account inactive. Photo: JOSE JORDAN / AFP

Bank transactions in Spain are monitored by the watchful eye of the country’s Agencia Tributaria, also known as Hacienda, especially when it comes to payments above €3,000, transfers of more than €10,000 and deposits of €500 banknotes. 

Banks in Spain are in fact legally obliged to inform Hacienda of any of these transactions, as well as credits and loans above €6,000, but tax authorities can also request permission from financial entities to investigate a specific account at any time.

The general consensus is that the State and Spain’s private banks maintain a close relationship with little banking secrecy, at least when it comes to the financial movements of ordinary account holders.

Spain’s Tax Agency can take all the money from inactive bank accounts

Rather than just being able to monitor transactions, Spain’s Tax Agency can also check for account inactivity as banks provide them with this information as well.

Fortunately, they only have the right to empty inactive accounts after 20 years without use.

Although this may seem to exclude the vast majority of account holders, Hacienda still managed to fill public coffers with an extra €12.57 million from these inactive accounts in 2019, 13 percent more than the previous year (€150 million over the last 10 years).

It could be an account which an elderly relative has and completely forgotten about, an account of a person without descendants who can inherit the money or one which you opened when you lived in Spain years ago.

It’s worth noting that this also applies to any inactive banking product: investment funds, fixed-income securities, economic rights etc.

Don’t leave your Spanish account without any money in it

The Bank of Spain has warned account holders in the country that when cancelling an account “it isn’t enough to leave your balance at zero”, but rather that you have to contact the bank to give express written instructions to cancel the account.

Even if you want to keep the account open in case you choose to use it in the future, remember that most banks in Spain charge maintenance and other fees on a regular basis.

This means that you could be unknowingly overdrawn if you have very few funds and a penalty fee which could mount up without your knowledge if you’re not receiving correspondence from your Spanish bank.

More banking fees after three years of inactivity

As a general rule, when three years have passed and a Spanish current account has not registered a single transaction, Spanish banks put these dormant accounts on a separate list, to which a different set of maintenance fees apply with respect to regular account users.

The standard practice is for them at the very least to charge the maximum maintenance fees published in the Bank of Spain: €36 euros per year.

There are many cases of parents opening accounts and depositing a small amount for their newborns, only to forget about the accounts all together and then find out that they are a couple hundred euros overdrawn.

READ MORE:

Don’t expect banks to get in touch

Even though the Bank of Spain considers it bad practice for private banks to not inform the holders of inactive accounts that they are being charged, it’s still something that happens regularly.

According to consumer.es, Spanish banks don’t tend to pressure the customer to pay the expenses derived from an account that has been abandoned, allowing debt to mount up.

There are also reports that some account holders are instructed to withdraw all funds from their accounts instead of officially closing them, under the premise that after 6 months these will be deemed cancelled accounts, which is not correct.

You should always update your contact details and address so that you can receive all the necessary correspondence from the bank.

That way you will have a better claim as you do have the right to report them for not informing you about the charges.

If your bank doesn’t offer you a satisfactory solution, you can contact the “Departamento de Conducta de Mercados y Reclamaciones del Banco de España” (The Bank of Spain’s Department of Conduct and Claims) on 900 54 54 54 or 913 38 88 30 (C/ Alcalá, 48, 28014 Madrid).

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TAXES

What’s the difference between Spain’s wealth tax and the solidarity tax?

High earners in Spain may be confused about the difference between the regular wealth tax and so-called temporary 'solidarity tax' on millionaires. Here are the main differences and what you need to know.

Published: 12 September 2024 11:44 CEST
What’s the difference between Spain’s wealth tax and the solidarity tax?

The super rich in Spain are generally subject to one of two headline taxes targeting wealth, depending on where they live. Although there are several smaller taxes they (and most people) also pay on top of those, today we’ll focus on the two big ones.

There’s the general wealth tax (known as el impuesto de patrimonio in Spanish) that is levied on net worth, and in recent years the Spanish government has also established the supposedly temporary (more on that below) ‘solidarity’ tax, which is known as the impuesto de solidaridad a las grandes fortunas and levied on the assets of millionaires.

You may also see it referred to as the ‘millionaire’s tax’ in Spanish media.

But what are the differences between the two? Who pays which one, and should you ever pay both?

READ ALSO: ‘Fewer Lamborghinis’: Spain’s PM aims to tax the super-rich more

Wealth tax

El impuesto de patrimonio – This is Spain’s standard wealth tax.

According to information from the Spanish treasury: “Wealth Tax is levied on the net wealth of individuals, i.e. all the assets and rights of economic content of which they are the owner, less any charges and encumbrances that reduce their value, as well as the debts and personal obligations for which the owner is liable.”

Generally speaking, people who are resident in Spain pay this tax, and those that at least have fiscal residency (spending at least 183 days here a year) meaning that Spain is one of the few countries who has a wealth tax on residents and non-residents alike.

Residents pay tax on all their wealth, whereas non-residents only pay it on any Spanish assets they have. 

Regional governments in Spain have the ability to set their own wealth taxes and create different deductions, therefore there is no one flat wealth tax rate across the whole country. Be sure to check your regional rules for a fuller picture of your tax obligations.

Generally speaking, however, it’s progressive and starts at 0.3 percent at the lower taxable bases, rising to 3.5 percent on fortunes over €10 million.

The Treasury also outlines some general criteria in the following situations:

  1. “Those who, in accordance with the regulations for this tax and once the appropriate deductions or rebates have been applied, owe money, or for the purposes of applying the first limit, it should be borne in mind that if the taxable base, determined in accordance with the tax rules, is equal to or less than the exempt minimum established, either generally at €700,000, or in the amount that the Autonomous Communities have approved for their residents in the exercise of their regulatory powers over the aforementioned exempt minimum, there will be no obligation to file a tax return.”

  2. “When the above does not apply, the value of their property or rights, determined in accordance with the tax regulations, is greater than €2,000,000. For the purposes of the application of this second limit, it includes all owned property and rights, whether or not they are exempt from the tax and calculated without considering any burdens or encumbrances that reduce their value or the personal obligations or debts for which the taxpayer is answerable.”

So, in short, if you have a taxable base of €700,000 or above (or whatever your regional base is) or property worth €2,000,000 or more, you’ll need to file a wealth tax return.

Solidarity tax

The other is Spain’s temporary tax on the super rich (impuesto de solidaridad a las grandes fortunas) which is usually referred to as the millionaire’s tax or solidarity tax. It’s a tax on people worth more than €3 million and it’s not a tax on income, but rather on assets and holdings.

All Spanish tax residents who have a net worth over €3 million must pay it. Be aware, it’s a tax on worldwide assets, not just what you own in Spain. It also applies to non-residents with Spanish assets above €3 million.

According to tax data, the millionaire’s tax targets just 12,010 payers, which represents barely 0.1 percent of the total taxpayer base in Spain. Unlike the normal wealth tax, Spain’s solidarity tax is levied on a national level. 

READ ALSO: Q&A: How does Spain’s solidarity tax on wealth work?

The tax is progressive, so you pay more tax the more wealth you have:

  • 0 percent for the first €3 million (the taxable base)
  • 1.7 percent between €3-€5 million
  • 2.1 percent between €5-€10 million
  • 3.5 percent for €10 million and above

It was introduced by the country’s left-wing coalition in 2022 in an attempt to help Spaniards weather the economic storm of the cost-of-living crisis. But as of September 2023, around a year after the tax measure was first brought in, the Spanish government reported that it had raised €623 million in revenue, a decent amount but considerably less than the initial projection of €1.5 billion. 

READ ALSO: How wealthy people in Spain are avoiding the millionaire tax

This seems to be because wealthy Spaniards and foreigners are finding creative ways to avoid paying it. This is mainly done through ‘donations’ in order to make the money non-taxable or to reduce the taxable base on paper.

Another method increasingly used by the wealthy seems to be setting up and putting money in venture capital or private equity firms.

According to Spain’s National Securities Market Commission, the creation of venture capital firms has grown by 38 percent since the government first announced the millionaire’s tax.

It was originally intended to be a temporary tax to combat the cost of living crisis, but noncommittal noises from the Spanish government in recent months suggest that it could well become permanent. 

READ ALSO: When will Spain’s millionaire tax be scrapped?

Double taxation?

As you now know, the solidarity tax is not the same as Spain’s annual wealth tax and according to tax professionals you should not have to pay the tax twice.

If you live in a region where you need to pay wealth tax, it will be deductible from the solidarity tax, but if you live in one of the two regions where you don’t pay wealth tax – Madrid or Andalusia, where it’s been abolished – you won’t be able to deduct any.

As is, the taxes an individual pays in the existing wealth taxes as calculated under local regional rules are deductible from what they need to pay for the Spain Solidarity Wealth Tax.

We at The Local Spain are not tax professionals. What we know, we have learned the hard way by researching and reading, but if you have any doubts about your particular situation, it’s always best to talk to a lawyer. 

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