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Practical Heritage Manual 2021.

Deductible debts

Regulations: Art. 25 Wealth Tax Law

Deductible debts

The following are considered deductible debts in the Wealth Tax: charges and liens of a real nature that reduce the value of the respective assets or rights, as well as personal debts and obligations for which the taxpayer must respond.

Debts will only be deductible when they are duly justified, and in no case will the interest be deductible.

Debts will be valued at their nominal value on the date of tax accrual (December 31).

Non-deductible debts

The following will not be subject to deduction:

  1. The amounts guaranteed, until the guarantor is obliged to pay the debt, because the right has been exercised against the principal debtor and the latter has become bankrupt. In the case of joint liability, the amounts guaranteed may not be deducted until the right against the guarantor is exercised.

  2. The mortgage that guarantees the deferred price in the acquisition of an asset, without prejudice to whether the deferred price or guaranteed debt is.

  3. The charges and liens that correspond to assets exempt from this tax, nor the debts incurred for the acquisition of the same.

    When the exemption is partial, as occurs in cases where the value of the habitual residence is greater than 300,000 euros, the proportional part of the debts corresponding to the non-exempt part of the asset or right in question will be deductible, where applicable. 

Special case: debts related to affected assets and rights

The inclusion of these debts together with the remaining deductible debts will only proceed when the following circumstances occur:

  • When assets related to business and professional activities are not exempt from the Wealth Tax.

  • When the taxpayer does not keep accounting records in accordance with the Commercial Code.

Note: In cases of real obligation to contribute, only the charges and liens that affect the assets and rights located in Spanish territory or that can be exercised or must be fulfilled in the same, as well as the debts for capital invested in the indicated assets, will be deductible.