B Law & Tax
05 May 2023

Tax Advisor: Everything you need to know about the Temporary Solidarity Tax on Large Fortunes

The Personal Income Tax season is full of novelties for the year 2023. One of the most talked about aspects and that is creating more controversy between the different Autonomous Communities is the Tax on Large Fortunes, which is regulated in a different way in this exercise and that still leaves some doubts about who should correspond will be obliged to the payment of this tax and in what way. In this text we will solve some of the most recurrent doubts.

When is the Temporary Solidarity Tax on Large Fortunes applied?

The declaration of the so-called Temporary Solidarity Tax on Large Fortunes (ITSGF) must be made in July, between the 1st and 31st.

What is the new Temporary Solidarity Tax on Large Fortunes like?

This tax will be applied initially to fiscal years 2022 and 2023, and is configured as a direct, personal and complementary tax to the Wealth Tax.

The tax will initially be applied in 2022 and 2023 due to its temporary nature. However, the legislator leaves the possibility open to evaluate the results at the end of the period and, based on these, to propose the continuation or elimination of the tax. The rule applies to the entire national territory, although it does not affect the Basque and Navarre foral regimes or the international treaties and conventions included in the domestic legislation. In addition, the transfer of the tax to the autonomous communities is not allowed.

The Law establishes that in order to determine the taxpayers, exemptions and the taxable base, the rules of the Wealth Tax will be applied.

Who pays the Temporary Solidarity Tax on Large Fortunes?

The ITSGF is applicable to all those individuals whose net wealth exceeds 3 million euros. If it is a personal liability, the taxable base will be reduced by 700,000 euros as a minimum exemption. However, those taxed by real obligation (non-residents) will not be eligible for the exempt minimum.

Individuals who pay Wealth Tax directly to the State because the yield has not been transferred to any autonomous community (i.e., non-residents) are not required to file a return, unless they must pay the corresponding tax liability. The Ministry of Finance and Public Function will be in charge of establishing the deadline for filing the return.

How much is paid in Temporary Solidarity Tax on Large Fortunes?

The percentage of the applicable rate to declare will be based on the net taxable income. As we said, if you do not reach 3 million euros, you are not obliged to declare this tax. However, if the net worth is from 3 million euros to 5,347,998.03 euros, the applicable rate will be 1.7%; if the net worth is from 5,347,998.03 euros to 10,695,996.06 euros, the applicable rate will be 2.1%; and if the net worth is greater than 10,695,996.06 euros, the applicable rate will always be 3.5%.

The proposed amendment establishes a joint limit for Wealth Tax, Personal Income Tax and the ITSGF itself. This limit implies that the sum of the payments of the three taxes cannot exceed, in the case of the personal liability, 60% of the sum of the payments of the personal income tax bases. If this limit is exceeded, the tax liability will be reduced until this threshold is reached, but the reduction cannot exceed 80%. Therefore, at least 20% of the quota of the Temporary Solidarity Tax of Great Fortunes must be paid. According to the Wealth Tax Law, capital gains with more than one year of generation period are excluded from this limit.

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