B Law & Tax
07 September 2023

Tax Advisor: More than 500 fortunes avoid paying Wealth Tax thanks to their residency in Madrid

In the last 10 years, the number of taxpayers with a net wealth of more than €30 million has doubled in number, from 443 people in 2012 to a record 831 people by the end of 2021, according to data provided by the Tax Agency. Surprisingly, however, less than half of these high-net-worth individuals paid wealth tax. Specifically, only 307 of these billionaires made contributions for this concept in 2021, which represents 37%. In other words, 524 individuals managed to avoid paying this tax.

The main reason for this phenomenon lies in the fiscal location of these taxpayers. In Spain, the autonomous communities have the authority to legislate on this nationwide tax, which allows them to apply various bonuses and deductions that, on occasions, can cancel out its effect in practice. In 2021, the only autonomous community that offered a 100% rebate was Madrid (in 2022, Andalusia also implemented it). Therefore, it can be concluded that these 524 taxpayers had their tax residence in the Community of Madrid, which allowed them not to pay a single euro for this concept, despite having to declare assets exceeding two million euros.

However, this system of bonuses also favors other groups of people with different levels of wealth. Of the 8,300 people throughout Spain who declared assets of between 6 and 30 million euros, only approximately 4,250 of them (50%) paid the tax. In the case of the 63,400 taxpayers with assets ranging between 1.5 and 6 million euros, more than 51,000 people (80%) paid the tax. Finally, of the 153,700 people who owned wealth ranging from 300,000 euros to 1.5 million euros, a total of 146,000 individuals had to pay Wealth Tax.

The data provided by the Tax Agency show how the tax rebate in Madrid has a significant effect on the total tax reductions applied by other regions. In the 15 autonomous communities of the common regime (since the Basque Country and Navarre have independent tax systems), the autonomous discounts reached a total of 1,226 million euros. Of this amount, 1,212 million euros were derived exclusively from the rebate in Madrid.

B Law & Tax International Tax & Legal Advisors.

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