We are back with more analysis of tax models, in this case of model 714 or, as it is also known, the Wealth Tax. Its presentation is mandatory (we will explain later on to whom it refers) and it is usually open from April 7 to June 30. This time is given to each caregiver to check whether or not they have to present it depending on their situation.
As with form 100 (the popular income tax return), the obligation to file it depends on whether they exceed a series of limits on assets and rights, an element that can change throughout the year. Hence, it is necessary to consult with your counsel or re-read the filing conditions from time to time in case you eventually have to file. Today we will see in which cases the form 714 must be filled in and under which requirements.
What is Form 714?
Form 714 or wealth tax serves to tax the value of all assets and economic rights of a person at the time of accrual of the tax. The net worth of an individual, taking into account taxes, deductions for expenses that may reduce its value and debts to be settled at that time.
This tax is national, which means that it does not matter which autonomous community you are in: you must file it. The foral tax regimes of the Basque Country and Navarre are not taken into account. Therefore, it is the autonomous communities themselves that will control and modify the tax.
As has been the case in recent years, filing begins with a voluntary period, usually between April and June, although it is best to consult the tax calendar for the year, which is published on the Tax Agency’s website.
Who must file the asset declaration?
The persons obliged to file the Wealth Tax or Form 714, called taxpayers, are those who meet certain requirements:
- The value of its assets and rights must exceed €2,000,000. No personal obligations or encumbrances will be taken into account.
- If once the deductions or allowances have been made, the tax liability of the tax form is to be paid.
- If the value of rights and assets does not exceed €2,000,000, the tax return will still be filed if the taxable base (net worth) is greater than the exempt minimum. Normally, this figure stands at €700,000, but each autonomous community sets its own maximums and minimums:
- Catalonia: €500,000.
- Aragón: €400,000.
- Extremadura: 500,000 euros, which becomes 600,000 euros if there is a degree of disability equal to or higher than 33%, 700,000 euros if the degree is equal to or higher than 50% and 800,000 euros if it is equal to or higher than 65%.
- Community of Valencia: 600,000 euros, 1,000,000 euros if the person suffers a degree of mental disability equal to or greater than 33% or if the person has a degree of physical or sensory disability equal to or greater than 65%.
In Madrid there is a 100% rebate on the amount of this tax, so that only those who have assets of more than 2,000,000 €, although without income, will have to file form 714.
It is necessary to comment and emphasize that this model, which taxes goods and rights in already established parameters, eliminates from the calculation for the taxable base:
- Certain investments, such as pension plans or group insurance.
- The habitual residence, provided that it does not exceed €300,000 in value.
The ‘curious’ thing is that the model, despite not taking into account the 2 elements already mentioned, does contemplate works of art, antiques and business patrimony (you can consult it in article 4.3 of Law 19/91). The final and complete amount to be paid will depend on the respective autonomous communities, so both factors must be taken into account.
Remember that certain investments such as pension plans, business plans and group insurance contracts will not be included in the taxable base of the model.
Let’s summarize what we have seen so far: if you have assets exceeding 700,000 € without adding the main residence, you will only have to make a simulation and subtract your assets from the elements that we have just indicated.
As the minimum exemption is 700,000, the net taxable income is calculated by subtracting this figure from the net worth. It is to this base that the rates by brackets will be applied first and then the corresponding allowances or reductions.
If we find ourselves in a case of marriage in community of property, the procedure in relation to form 714 would be as follows: the first thing to do would be to divide between the assets that are half owned by the 2 components of the marriage and the deductions and minimums would be applied to that amount. If, for example, the couple owns a 400,000 € home in community of property regime, the asset that each one will declare in that concept will be 200,000 €, so they would be exempt as they would not reach the minimum 300,000 €.
How to fill in the Form 714?
This model is not different from others we have explained, but it is a little more extensive than usual. It consists of 10 sections and an income document, which we analyze below:
Section 1: general information. Here, as a ‘cover letter’, all the identification data of the taxpayer is included, such as the fiscal year, the special taxation modality, the economic regime of the marriage, the autonomous community in which the taxpayer resides, the complementary declaration and whether the processing of the tax return is carried out by the taxpayer or his representative.
Sections 2 to 8: assets, rights and debts. It is necessary to indicate all the elements that form part of the taxpayer’s assets and to indicate their nature, their exemption and their allocation to the economic activity, their current account deposits, their securities representing the transfer of capital to third parties, etc.
Paragraphs 9 and 10. These 2 sections comprise a summary of the net worth that forms the net taxable income (it is automatically filled in when the elements of the previous sections are included according to their classification).
Now all that remains is to generate the payment document, which must indicate the method of payment (deposit or direct debit) and the account number to which the payment is to be made. Remember that Form 714 must be filed electronically, so it will be necessary to install an identification system on a computer or request the service from a tax consultancy such as
Blegal
.
What happens if the value of the assets or rights exceeds €2,000,000? Whether or not they are exempt from tax, all the assets and rights of the taxpayer that compute without considering the charges and encumbrances that reduce the value of the same or personal debts or obligations must be taken into account at first.
If the person who has to pay this tax is not a resident (does not reside in Spain), only the value of the assets and rights located, that can be exercised or that have to be fulfilled in Spanish territory and of which, of course, the taxpayer is the owner, will be taken into account.
Even if the total value of the assets is less than 200,000 €, if the tax is payable, the tax must be paid. This situation usually occurs when the taxable base (the value of the taxpayer’s net worth) is higher than the minimum exempt amount.
What assets and rights are included in the model?
Remember that, as mentioned above, there are certain cases in which an asset or right does not need to be included in the presentation of the model. It is important to always keep them in mind and know them in order to know if, finally, we need to file this model or not.
Those that form part of the business assets and are the fundamental source of income of the taxpayer shall be included in the calculation of net worth. Article 4.3 of Law 19/91 also includes some works of art and antiques, although there are some exceptions.
On the other hand, certain investments (group insurance contracts, corporate and/or pension plans, PPAs, etc.) are not considered when calculating the taxable income.
The best thing to do in these cases to be sure whether or not to file Form 714 is to perform a simulation. Remember to take into account all the cases that we have discussed throughout the article and that each autonomous community has its own scales and allowances. Therefore, in addition to the simulation, a small documentation process must be carried out in order to know our particular situation perfectly.
We know that there is a lot of data to take into account, and that is why we always recommend, as experts in the law and in the process of filing tax returns, to count on the services and advice of a tax advisor to file this tax return and avoid any legal misunderstanding with the Tax Agency.
If you are looking for a team that is professional and prepared, but at the same time diverse and that works closely together so that you get exactly what you need, at
Blegal
we are your advisor. Whatever legal, tax or labor problem you may have, you can count on us. We have a portfolio of services that includes property management and insurance brokerage, so if you were looking for a change, now is the time to take the leap to an agency and quality consulting.
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