B Law & Tax
18 October 2023

Tax advisor: The anticipation of an imminent ruling by the Constitutional Court on the Temporary Solidarity Tax on Large Fortunes puts pressure on those taxpayers who have not yet appealed it

The judges of the Constitutional Court foresee resolving the constitutional challenges from the autonomous communities against the Temporary Wealth Tax in just two weeks.

The crucial decision regarding the new tax on large fortunes, promoted by the Ministry of Finance and challenged by several autonomous governments, is approaching. The Constitutional Court will rule on its validity in two weeks, likely during the Plenary session on October 24. This short time frame reduces the opportunity for taxpayers interested in challenging it to benefit from a favorable ruling. However, the current composition of the court suggests that the decision may be favorable to the Ministry of Finance.

The Temporary Wealth Tax on Large Fortunes was created last year with the purpose of financing anti-crisis measures at the expense of the wealthiest citizens and harmonizing wealth taxation among the autonomous communities. The urgency led the government to approve it quickly, including it as an amendment to a law that established new taxes for banks and energy companies, and without correcting design flaws that have affected its collection capacity.

The tax on fortunes was used by the Ministry of Finance as a tool in the tax battle with the autonomous communities governed by the PP, particularly after Andalusia followed the example of the Community of Madrid by exempting 100% of the Wealth Tax.

As a result, the wealth tax was challenged in the Constitutional Court by the regional governments of Madrid and Andalusia, who unsuccessfully requested its temporary suspension. Subsequently, the governments of Murcia, the Xunta de Galicia, and the Assembly of Madrid, all under the control of the PP, joined the legal action.

The legal challenges that the Constitutional Court is preparing to address criticize the tax from various angles. On one hand, they argue that the approval of the tax bypassed the requirements for prior consultation and mandatory reports required for a government bill. They also contend that it prevented Parliament from amending a tax that was originally an amendment to another law. It is also argued that the tax exceeded the legitimate limits for using this legal avenue, as the amendment in question was not related to the central subject of the law to which it was attached. Therefore, potential violations of Articles 23.2, 66.2, and 87 of the Spanish Constitution are raised, as reported by the Registry of Tax Advisors (REAF).


Opponents of the tax argue that it implies an inappropriate harmonization of the regulatory powers transferred to the autonomous communities regarding the Wealth Tax. Essentially, the new tax replicates the tax transferred to the autonomous regions, raising the exemption threshold from 700,000 euros to 3.7 million and allowing the Wealth Tax bill to be deducted from the final settlement. This limits its practical application to regions where the original wealth tax has been reduced or is no longer applied.


Since the transfer of Wealth Tax is regulated by an organic law, any modification would require an agreement between the Joint State and Regional Committees, as well as parliamentary processing of equal status. Therefore, it is argued that Article 157.3 of the Constitution could be violated, which establishes that these modifications must be approved by an organic law, and that the financial autonomy of the regions protected by Article 156.1 would be undermined.


Critics of the tax also point out that it had retroactive effects for 2022, affecting the wealth of that year despite coming into effect on December 29 of the same year. This would have prevented taxpayers from making informed decisions, potentially violating the legal certainty principle of Article 9.3 of the Constitution.

Finally, it is questioned whether the tax violates the principles of economic capacity and non-confiscation of Article 31.1 of the Constitution, by imposing rates of 3.5% on amounts exceeding 10 million that may exceed the annual income obtained by taxpayers from their wealth.

The imminent ruling on these potential constitutional violations means that interested taxpayers should file requests for self-assessment correction and the return of undue income as soon as possible if they hope to benefit from a ruling favorable to the autonomous regions, according to the REAF. It is important to note that the Constitutional Court has already limited retroactive effects in the past, as in the case of the Municipal Capital Gains Tax.

In this case, however, it is important to consider that the Constitutional Court supports what is known as “medium-degree retroactivity,” and the current composition of the court, mostly progressive under the presidency of Cándido Conde-Pumpido, suggests a ruling against the interests of taxpayers.


The legal dispute triggered by the regional governments of Madrid, Andalusia, Murcia, and Galicia against the Temporary Solidarity Tax on Large Fortunes raises questions about the 623 million euros collected in its first implementation and the future of this tax, originally conceived for two years, with the intention of evaluating its extension.

In its first assessment period, which took place in July for assets in the year 2022, the tax was paid by the country’s 12,010 wealthiest individuals, with an average of 52,000 euros per taxpayer. Nine out of ten euros came from residents in Madrid, where 555 million euros were collected. This contrasts with the 700 million euros Madrid could have collected if it had applied the Wealth Tax, which is 100% exempted, and the national collection of which would have reached 2,000 million euros.

However, the revenues from the wealth tax were directed straight to the state coffers of the Ministry of Finance, taxing wealth over three million euros, with an exemption of 700,000 euros and deducting up to 300,000 euros from the value of the residence for residents.

From there, the tax is tiered with rates ranging from 0% for the first three million euros to 3.5% for the largest fortunes. The Spanish Association of Tax Advisors (Aedaf) anticipated an increase in legal actions shortly after the tax payment, awaiting the decision of the Constitutional Court. Regardless of its verdict, the dispute will continue in the National Court, where the Community of Madrid and the Madrid Association of Family Businesses have also presented their arguments.


B Law & Tax International Tax & Legal Advisors.


“In B LAW&TAX we specialize in international tax advisory services for both companies and individuals. If you would like to obtain further information, we would be delighted to assist you at 917817194 or at  [email protected]