What is Wealth Tax?
Wealth Tax is a form of direct tax imposed on individuals or legal entities based on their net worth or the market value of their assets.
Wealth tax is different from income tax, which is based on a person's earnings or profits. Wealth tax is typically levied periodically, such as annually or every few years, and may be charged at a fixed rate or as a percentage of the total wealth.
How wealth tax is calculated?
The tax is calculated as a certain percentage of the total value of all owned assets, including land, stocks, bonds, cash, and other investments. Unlike most income taxes, Wealth Tax targets very wealthy individuals or families who possess highly valuable assets. It may also be applied to corporate bodies and trusts in addition to natural persons.
It is usually assessed annually and levied at different rates depending upon the amount of net worth owned by an individual or family. In certain cases, exemptions may apply for certain asset classes.
Wealth tax vs Income tax
Wealth tax and income tax are two distinct forms of taxation of financial resources. Wealth tax is a levy on total net assets owned by an individual or entity, while income tax is a levy applied to one's income from various sources. Wealth tax usually applies to high-net-worth individuals and can include such things as capital gains, rental property earnings, foreign savings, and even artwork or jewelry. Income taxes are assessed each year based on the income received by an individual, including earnings from wages and other sources such as investments or government benefits. Both wealth and income taxes may be subject to additional deductions based on eligibility criteria in different countries.