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B Law & Tax
11 December 2023

Tax advisor: Constitutional Court Resolution: Challenge to the Temporary Solidarity Tax on Large Fortunes in the Community of Madrid and Fiscal Analysis.

The Constitutional Court completely rejects the challenge presented by the Government Council of the Community of Madrid against Article 3 of Law 38/2022, dated December 27, which establishes the Temporary Solidarity Tax on Large Fortunes .



Fiscal Argumentation on the Challenge to the Temporary Solidarity Tax on Large Fortunes in the Community of Madrid

The basis of the appeal was that this tax was introduced through an amendment during the processing of a bill that had a different purpose, which, according to their argument, violated the financial autonomy of the Community of Madrid.

Furthermore, they claimed that it violated the organic law reserve regarding the transfer of taxes, particularly in relation to the wealth tax.

In its judgment 149/2023 issued on November 7, the Plenary of the Constitutional Court dismisses the procedural defect regarding the right to amend and argues that this is only violated when there is an obvious and manifest lack of connection between the content of the amendment and the initiative. In this case, since Law 38/2022 aimed at creating two taxes, the Constitutional Court considers that the amendment meets the homogeneity requirement.

Alleged Incompatibility with the Wealth Tax

The Constitutional Court (TC) asserts that the contested tax is complementary and does not interfere with its jurisdiction over the wealth tax. It emphasizes that the minimum exempt amount, the tax rate, deductions, and bonuses for the Wealth Tax applicable in the Community of Madrid will continue to be decided exclusively by the region. The introduction of the tax on large fortunes does not imply changes in this regard.


Exercise of State Tax Powers in Fiscal Harmonization

Furthermore, the Constitutional Court adds that the State has the authority to use its tax powers to harmonize an area occupied by regional taxes, especially concerning its own fiscal jurisdiction. This action does not negatively impact any regional competence. Therefore, the claim of violating the principle of financial autonomy and the associated political autonomy is rejected.


Dismissal of Alleged Violation of Non-confiscation and Economic Capacity Principles

The temporary solidarity tax on large fortunes, being a wealth tax, would only have a confiscatory effect if it depletes the value of the wealth, not in relation to the income generated by the taxed assets, which represents a different manifestation of economic capacity.



The Constitutional Court justifies that the principle of non-retroactivity is not violated because the temporary solidarity tax on large fortunes is of an instantaneous nature, not periodic, and does not affect situations predating its enforcement.



Constitutional Controversy

The Government Council of the Community of Madrid argues that the advance implementation of the temporary solidarity tax on large fortunes unconstitutionally impacts the principles of legitimate trust and legal security. This is by undermining the reasonably grounded expectation of citizens regarding the foreseeable actions of the public authority in the application of the law.




B Law & Tax International Tax & Legal Advisors.


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