B Law & Tax
23 February 2024

Legal changes related to Wealth Tax

Following the declaration of constitutionality, Royal Decree-Law 8/2023 has been extended indefinitely, and several Autonomous Communities have made adjustments to their Wealth Tax regulations in order to attract revenue from this state tax. 

In this context, it is advisable to carry out a thorough review of both individual and family wealth to mitigate its impact.

Law 38/2022 of 27 December, published in the Official State Gazette on 28 December 2022, created the Temporary Solidarity Tax on Great Fortunes (ITSGF) initially for the years 2022 and 2023, with the aim of increasing revenue and harmonising regional regulations. This direct and personal tax is levied on the net wealth of individuals exceeding 3,000,000 euros, with an initial minimum exemption of 700,000 euros for residents. The first tax assessment took place on 31 December 2022.

The ITSGF quota is calculated taking into account the amount paid in Wealth Tax, which means that it mainly affects taxpayers in autonomous communities where the tax is not subsidised. However, the wording of the regulations has allowed the full amount of the wealth tax to be taken into account instead of the subsidised amount, which has led to lower than expected tax collection.

Between the creation of the ITSGF in December 2022 and the filing of self-assessments in July 2023, the most affected Autonomous Communities (those that subsidise the Wealth Tax), such as Andalusia, Galicia and Madrid, lodged appeals of unconstitutionality before the Constitutional Court (TC). Although the TC admitted the appeals in April 2023, it did not suspend the tax. Finally, in November 2023, the TC rulings dismissed the appeals, upholding the constitutional validity of the ITSGF.

To counteract the impact of the ITSGF, several autonomous communities have modified their wealth tax regulations. For example, in Madrid and Andalusia, a rebate is established based on the difference between the full amount of the Wealth Tax and the ITSGF. The Balearic Islands increase the minimum exemption, while Cantabria offers a 100% rebate up to a certain limit of wealth. In Galicia, the allowance is reduced by the amount of the ITSGF and the Wealth Tax rate is increased.

Royal Decree-Law 8/2023 of 27 December, published in the BOE on 28 December 2023, extends the ITSGF indefinitely and extends the minimum exemption to non-residents. It also establishes the electronic filing of tax returns.

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