B Law & Tax
23 April 2024

How is the Tax on Large Fortunes calculated?

On 29 December 2022, one day after the publication in the Official State Gazette of Law 38/2022, the Temporary Tax on the Solidarity of Major Fortunes (ITSGF), better known as the Tax on Major Fortunes, came into force.

Its implementation has not been without controversy due to its peculiarities. One of these is that it is established by means of a law that, in addition to this tax, creates levies on energy and financial institutions.

Another of its controversy was precisely its publication date, given that its entry into force on 29 December 2022 referred to that same year, and not the following year, 2023, as initially expected.

For this reason, the constitutionality of this new tax was called into question because of the way it was approved.

Who is affected and what is the tax levied?

The ITSGF is a direct, personal and complementary tax to the Wealth Tax, which is levied on net assets exceeding 3,000,000 euros.

This tax affects both tax residents in Spain (on their worldwide wealth) and non-resident and impatriate taxpayers, who are taxed on the assets they hold in Spain.

Like the Wealth Tax, this new tax is due on 31 December each year, with the self-assessment and payment period in the year from 1 to 31 July, i.e. one month after the Wealth Tax.

How is this tax calculated?

The taxable base is determined according to the Wealth Tax rules.

Therefore, the same exemptions can be applied as those contemplated in the Wealth Tax Law, the most relevant being those related to shares in family businesses and those referring to the main residence (the latter limited to a maximum of 300,000 euros).

In addition, as in the case of Wealth Tax, a reduction of the tax base is established as a minimum exemption of 700,000 euros in the case of personal liability.

The applicable tax scale is as follows:

Taxable incomeTax rate
Up to EUR 3 million0%
Up to EUR 3.000.000 and EUR 5.347.998,031,7%
Between EUR 5.347.998,03 and EUR 10.695.996,062,1%

The complementary nature of the ITSGF with respect to Wealth Tax is manifested through the deduction from the ITSGF quota of the Wealth Tax quota already paid.

Thus, in those regions where the Wealth Tax is maintained, the amount paid will be deducted from this new tax. In those regions where it has been abolished by means of a rebate, the whole of the new tax liability will have to be paid into the State coffers.

This has led some autonomous communities that had the Wealth Tax rebate to reactivate it, so as not to lose revenue to the detriment of the State, as has been the case of the Community of Madrid.

The regulation establishes a limit on joint taxation with personal income tax and wealth tax.

When the sum of the total tax payments of these taxes exceeds 60% of the personal income tax base, the amount of the new tax will be reduced until this limit is reached, without the reduction being able to exceed 80% of the amount of the tax on large fortunes prior to this reduction.

The rules for calculating this limit are those established in the Wealth Tax.

Measures to mitigate the impact: exemption for family businesses

To avoid a significant impact of this new tax, a detailed analysis of the taxpayer’s wealth and family, personal and economic circumstances will be necessary.

For those taxpayers who own shares in family businesses, it will be crucial to comply with the requirements that allow for their exemption from Wealth Tax and this new tax. These requirements include:

(a) That the entity does not have as its main activity the management of movable or immovable assets.

b) That the taxpayer owns at least 5% of the capital of the entity, individually, or 20% together with his/her spouse, ascendants, descendants or collateral relatives to the second degree.

c) The taxpayer exercises management functions in the entity, receiving remuneration that represents more than 50% of the business, professional and personal work income.

Family business groups can implement mechanisms to obtain tax exemption in full compliance with the law and its administrative interpretation, as the exemption was created to avoid taxation of real productive assets in family structured companies.

Many technical and legal aspects must be analysed and, if necessary, reorganised to achieve exemption in each specific case. It is important to highlight the requirement described in a) above in companies.

Many technical and legal aspects must be analysed and, if necessary, reorganised to achieve exemption in each specific case. It is important to highlight the requirement described in a) above in companies engaged in securities management or as holding companies, and in companies whose activity is the leasing of real estate.

This process requires a detailed analysis of the taxpayer’s assets and family, personal and economic circumstances, in relation to the applicable regulations not only of this tax, but also of Personal Income Tax and Corporation Tax, as well as their administrative interpretation.

At B LAW & TAX we are specialists in this new Tax on Large Fortunes, as well as in Wealth Tax. If you have any queries, please do not hesitate to contact us and we will help you to resolve your doubts.

B Law & Tax International Tax & Legal Advisors.


“En B LAW&TAX somos especialistas en asesoramiento fiscal internacional tanto a empresas como para particulares. Si desea ampliar la presente información, estaremos encantados de poder atenderle en el 917817194 o en [email protected]