In more detail
Background
Historically, nonresidents holding assets in Spain were subject to WT but were not permitted to limit this liability against income tax paid abroad. Article 31 of the WT Law provides that the combined amount of PIT and WT should not exceed 60% of the PIT tax base, with a maximum reduction of 80% of the WT liability. However, the Spanish tax authorities (STA) had denied nonresidents access to this benefit, resulting in a disproportionately high tax burden.
The Supreme Court's recent rulings have now clarified that nonresidents must be allowed to apply the joint PIT-WT limit. The court concluded that excluding nonresidents from this provision constitutes unjustified discrimination and is incompatible with the principle of free movement of capital established under EU law. The court emphasized that both residents and nonresidents are in a comparable situation for the purposes of this tax, and that modern information exchange mechanisms allow the STA to verify foreign income reliably.
In our view, this interpretation should also extend to taxpayers under the special inpatriate regime (commonly known as the Beckham Law), as they are taxed for WT purposes as if they were nonresidents. While there is no explicit confirmation yet, the underlying principle of avoiding confiscatory taxation supports its application to these cases.
Practical implications
Taxpayers can request rectification of previously filed tax returns and claim refunds for any WT payments that exceeded the joint limit for the last four non-prescribed years. The statute of limitations under Spanish law is generally four years from the day following the filing deadline, so claims for 2021 onward remain possible in 2025.
As of now, the STA have not yet issued detailed guidelines or updated tax forms to reflect this new doctrine. It is expected that guidance will follow, but, for now, taxpayers must rectify prior self-assessments and request refunds for undue payments.
The application of the joint limit depends on each taxpayer's specific income and asset structure and may involve complex calculations, especially for those subject to special tax regimes or with income from multiple jurisdictions.
Conclusions
The Supreme Court's judgment marks a turning point for nonresident taxation in Spain. By confirming the right to apply the joint PIT-WT limit, Spain is moving toward a fairer and more competitive tax environment for international investors.
Nonresidents who have filed and paid WT in Spain should urgently review their past filings to identify potential refund opportunities. Acting promptly is crucial given the statute of limitations.
This change comes at a time when WT itself is under constitutional review, following challenges to its permanent reinstatement and rate increases in 2021. If declared unconstitutional, only taxpayers who have previously contested their assessments may benefit from such a decision.
