BackIn 2022, the national level approved the Tax on Large Fortunes, which obliged many Autonomous Communities to modify their regulations regarding Wealth Tax. Among them, the Community of Madrid, which also made adjustments to its tax.
Since 2008, a 100% rebate was applied to the Wealth Tax quota. However, with the introduction of the new temporary Solidarity Tax on Large Fortunes at state level, this rebate ceased to apply to estates of more than 3 million euros.
This new tax was the subject of an appeal by several regions, including Madrid, to the Constitutional Court, which dismissed the appeal and approved the tax.
Subsequently, the Community of Madrid published a temporary amendment that will apply as long as the Large Fortunes Tax is in force.
Law 12/2023, of 15 December, establishes that the general 100% allowance will not apply, but that taxpayers may apply a regional allowance determined by the difference between the full amount of the Wealth Tax and the full amount of the Major Wealth Tax, once the joint limit has been applied to both amounts.
This modification came into effect in 2023, with the filing of the self-assessment in 2024.
In addition, Law 13/2023 of 15 December was published, amending the Consolidated Text of the legal provisions of the Community of Madrid on taxes ceded by the State, approved by Legislative Decree 1/2010 of 21 October.
This law, effective for tax years beginning in 2023, includes adjustments to the scale applicable to the general personal income tax base of tax residents in the Community of Madrid, increases in the minimum taxpayer and the minimum for descendants and ascendants, as well as increases in the amounts and limits of deductions in different areas, such as birth or adoption of children, renting of primary residence, educational expenses, among others.
Among these modifications is expected to be the so-called “Madrid Beckham Law“, a new tax benefit whereby the Community of Madrid will allow new taxpayers who settle in Madrid after having lived outside Spain for at least five years to apply a 20% discount on the regional personal income tax liability for investments in financial assets for a maximum of six years.
These modifications have meant that Madrid continues to be considered one of the most attractive regions for tax purposes, given the deflation of its Personal Income Tax, the forthcoming inclusion of the aforementioned tax benefit, and the prompt reaction to the Large Fortune Tax.
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