Impuesto sobre el Patrimonio: Spain's Supreme Court Confirms 60% Tax Cap for Non-Residents

Spain's Tribunal Supremo confirms: non-resident property owners may also apply the 60% cap on combined income and wealth tax. What this means for owners in Mallorca — with a worked example and practical guidance.

The 60% IRPF-Patrimonio Cap for Non-Residents? The Short Answer

The Tribunal Supremo has confirmed in two rulings (STS 1372/2025 and 1402/2025) that non-resident owners subject to Spain's wealth tax may also apply the 60% cap under Art. 31 LIP. The AEAT has adopted this position in the Manual Práctico de Patrimonio 2025, applying the cap to both residents and non-residents — limited to a maximum reduction of 80% of the original wealth tax liability.

This article deals with the Impuesto sobre el Patrimonio (Spanish wealth tax), not Modelo 210 (non-resident income tax).

Note: This article is for general information purposes only and does not replace individual tax or legal advice. Application of the cap depends on the individual case, supporting evidence, and the specific wealth tax declaration.

Why This Matters

The Impuesto sobre el Patrimonio (wealth tax) contains an important safeguard against confiscatory taxation: the so-called cap under Art. 31 LIP. It ensures that the combined burden of income tax and wealth tax does not exceed 60% of the income tax base.

The problem for non-residents: the cap refers by its wording to Spanish income tax (IRPF) — which non-residents do not pay, as they are instead subject to wealth tax under "obligación real" (only for assets located in Spain). The Spanish tax administration had therefore refused to accept the personal income tax paid in the country of residence as a comparator — with the result that non-residents could effectively never use the cap, while residents could.

For owners of high-value properties in Mallorca with corresponding wealth tax obligations, this can make a significant financial difference.

Legal Basis: What Did the Tribunal Supremo Decide?

The case originated with a Belgian-resident owner with real estate assets in the Balearic Islands, subject to Spanish wealth tax under "obligación real", who also paid Belgian personal income tax in his country of residence. He applied to have his Belgian income tax treated as the equivalent of Spanish IRPF for calculating the 60% cap. The TSJ of the Balearic Islands ruled in his favour in two judgments (1.2.2023, Rec. 432/2020, and 28.6.2023, Rec. 431/2020).

The Tribunal Supremo has now confirmed this position at the highest court level in cassation proceedings (recurso de casación). The central argument: the mere fact that someone does not reside in Spain and therefore pays no IRPF does not justify unequal treatment on wealth tax — this would breach the free movement of capital under EU law (Art. 63 TFEU). The Spanish tax administration had argued that it could not reliably verify foreign tax liabilities — the Tribunal Supremo rejected this, since international mutual assistance and information exchange mechanisms exist precisely for this purpose.

Important note on the cap: The cap does not reduce wealth tax without limit. Under Art. 31 LIP, the reduction is capped: it may not exceed 80% of the original wealth tax liability. At least 20% of the original wealth tax always remains — the cap can limit wealth tax, but not eliminate it entirely.

Classification, important for third-country residents: The AEAT has expressly adopted the new doctrine in the Manual Práctico de Patrimonio 2025, stating that the cap under Art. 31 LIP "debe aplicarse tanto a sujetos pasivos residentes como no residentes" (must be applied to both resident and non-resident taxpayers). This administrative practice goes beyond the specifically decided EU case, but does not replace a separate Supreme Court precedent for third-country cases. The case decided by the Tribunal Supremo explicitly concerned a Belgian (EU) taxpayer. For third-country residents such as those in the UK or Switzerland, there is no separate Supreme Court ruling to date — in a tax audit, the tax administration could in individual cases attempt to apply stricter standards, for example regarding proof or comparability of the foreign income tax.

Worked Example: Mallorca

Case: Belgian-resident owner, luxury property in Bendinat

Tax residence: Belgium (EU)
Property: luxury villa in Bendinat, whose relevant tax value for Impuesto sobre el Patrimonio purposes (for real estate: the highest of cadastral value, administration-verified value, or acquisition value — for properties acquired from 1.1.2022, potentially also the Catastro reference value, Valor de Referencia, if this was used as the basis for ITPAJD/ISD at the time of acquisition) significantly exceeds the applicable allowance
Wealth tax obligation in Spain: under obligación real, only for Spanish assets
Personal income tax paid in country of residence: can be taken into account for the comparison calculation as a functional equivalent to Spanish IRPF, provided it is documented and presented in a comparable manner

Previous practice: The 60% cap was denied because there was no Spanish IRPF liability → full wealth tax without any ceiling.

After STS 1372/2025 and 1402/2025: The Belgian income tax is included as an IRPF equivalent → the combined total of Belgian income tax and Spanish wealth tax may not exceed 60% of the (IRPF-equivalent) tax base → potential reduction of the Spanish wealth tax liability.

Simplified worked example (illustrative, not a realistic case):

Assumed Spanish wealth tax without cap: €25,000
Assumed personal income tax in Belgium (as IRPF equivalent): €40,000
Assumed IRPF-equivalent tax base: €100,000
60% cap: €100,000 × 60% = €60,000
Combined income + wealth tax without cap: €40,000 + €25,000 = €65,000 → exceeds the cap by €5,000
With cap: the Spanish wealth tax would be reduced by €5,000 to €20,000

Cross-check against the 80% safeguard (Art. 31 LIP): The maximum reduction may not exceed 80% of the original wealth tax liability — for an original liability of €25,000, this means a maximum reduction of €20,000 (minimum tax: €5,000, i.e. 20%). The €5,000 reduction calculated here is well within this limit and therefore applies in full.

Note: Purely illustrative figures to demonstrate the mechanism, not a realistic case. The actual saving depends entirely on the individual case — level of wealth, level of income tax paid in the country of residence, and its comparability with the Spanish IRPF system. In practice, the calculation is more complex because the exact composition of the tax base, the type of income, and the 80% maximum reduction must also be examined.

Common Mistakes / What Goes Wrong

Mistake 1: Owners assume the cap applies automatically — in fact, it must be actively claimed in the wealth tax return or retrospectively via a rectification claim for previous years.
Mistake 2: Missing documentation of income tax paid abroad — without evidence of the foreign tax burden, no comparison calculation can be made.
Mistake 3: Confusion with the general wealth tax allowance — the cap is a separate mechanism, not an additional allowance.

From Practice with High-Net-Worth Non-Residents

In conversations with owners of high-value properties in Mallorca subject to wealth tax, a common pattern emerges: the cap was simply unknown to many owners and sometimes even to their advisors abroad, because it is a specifically Spanish provision. Particularly for larger estates, it is therefore worth reviewing non-time-barred years where wealth tax was calculated without the cap.

Does This Affect Me? → Initial Assessment

Are you not tax-resident in Spain but own a property in Mallorca with wealth tax obligations? → This overview can be a first indicator of whether a review might be worthwhile for you.

Fiscaro does not currently offer its own service for Impuesto sobre el Patrimonio and focuses on the Modelo 210 subject area. Since applying the cap requires a comparison with the personal income tax paid in the country of residence, we recommend an individual review by an Asesor Fiscal for this purpose.

What Does This Mean in Practice for Owners?

For non-resident owners with Spanish wealth tax obligations, this means:

It is worth documenting your income tax burden in your country of residence for the relevant non-time-barred years.
A review of previously filed wealth tax returns for rectification potential may be worthwhile if no cap was applied.
According to current AEAT administrative practice (Manual Práctico de Patrimonio 2025), the rule applies to residents and non-residents alike, without an explicit restriction to EU/EEA residents. The decided court case concerned an EU citizen (Belgium) — for third-country residents, higher requirements regarding proof and comparability of foreign tax may apply in practice.

Comparison: Residents vs. Non-Residents and the Cap

	Residents (Spain)	Non-residents EU/EEA (court case decided)	Non-residents third countries (AEAT wording does not exclude them)
Cap under Art. 31 LIP	has always applied	confirmed by Supreme Court + AEAT Manual	AEAT wording does not exclude them, but no separate third-country court case known
Maximum reduction	max. 80% of wealth tax liability	max. 80% of wealth tax liability	max. 80% of wealth tax liability
Comparator	Spanish IRPF	personal income tax in country of residence	personal income tax in country of residence; application and proof case-dependent for third countries
Refund possible?	–	Yes, for non-time-barred years, subject to case-by-case review	subject to case-by-case review

FAQ

Does the cap apply automatically to all non-residents? No. It must be actively claimed, and the comparison calculation with foreign income tax must be evidenced on a case-by-case basis.

Does this also apply to owners from the United Kingdom or Switzerland? The AEAT wording in the Manual Práctico de Patrimonio 2025 does not distinguish by country of origin and refers generally to "sujetos pasivos residentes como no residentes". However, the decided court case concerned a Belgian (EU) taxpayer — there is no separate Supreme Court ruling for a third-country case to date. For owners from the United Kingdom or Switzerland, application of the cap should therefore be assessed on a case-by-case basis, particularly regarding evidence and comparability of the foreign income tax.

Where does it say that the cap also applies to non-residents? In the Manual Práctico de Patrimonio 2025, the AEAT states that the cap under Art. 31 LIP applies "tanto a sujetos pasivos residentes como no residentes". The Manual thus confirms the Tribunal Supremo's line (STS 1372/2025 and 1402/2025), but does not replace a separate third-country court case.

Can the wealth tax be eliminated entirely through the cap? No. The reduction is limited to a maximum of 80% of the original wealth tax liability — a minimum burden of 20% of the original liability always remains.

What is the difference from the wealth tax allowance? The allowance reduces the wealth tax base itself. The cap is a separate mechanism that limits the total tax burden from income tax and wealth tax combined.

Can I apply for a retrospective correction for years already filed? For non-time-barred years (general limitation period under the LGT: four years from the end of the relevant filing deadline), a rectification (rectificación de autoliquidación) is generally possible, with explicit reference to rulings STS 1372/2025 and STS 1402/2025.

What evidence do I need to provide? Essentially, proof of the personal income tax paid in your country of residence that enables a comparison calculation with the Spanish IRPF system — the specific requirements should be discussed with a tax advisor on a case-by-case basis.

Sources

Tribunal Supremo, Sala de lo Contencioso-Administrativo, Sentencia 1372/2025, 29.10.2025 (Rec. 4701/2023), ECLI:ES:TS:2025:4849
Tribunal Supremo, Sentencia 1402/2025, 3.11.2025 (Rec. 7626/2023), ECLI:ES:TS:2025:4846
Tribunal Superior de Justicia de Illes Balears, Sentencia of 1.2.2023 (Rec. 432/2020), ECLI:ES:TSJBAL:2023:130
Art. 31 Ley del Impuesto sobre el Patrimonio (LIP)
Art. 63 TFEU (Treaty on the Functioning of the European Union)
AEAT, Manual Práctico de Patrimonio 2025, section "Principales Novedades"

Conclusion

Unlike some currently open proceedings, this question has been settled for non-residents both at the highest court level and in the AEAT Manual at the administrative level. For owners of high-value properties in Mallorca, it is worth checking whether non-time-barred years are affected.

→ If you are unsure whether your wealth tax assessment in the Balearic Islands could benefit from this rule, a consultation with an Asesor Fiscal is the right next step.

Christopher Deppe Founder of Fiscaro Real Estate Economist | Dipl.-Wirtschaftsingenieur (FH) Managing Director, DC Finest Real Estate Mallorca Active in Mallorca for over 15 years