B Law & Tax
23 October 2023

Tax advisor: The Constitutional Court will discuss the constitutionality of the Temporary Solidarity Tax on Large Fortunes on Tuesday

The matter has been included in the agenda of the next session of the court to discuss the appeal filed by the Community of Madrid against this temporary tax.

The Constitutional Court will examine the legitimacy of the temporary tax on large fortunes on October 24. The Plenary Session of the highest authority in the interpretation of the Constitution has included this topic in its upcoming meeting to debate, for the first time, the legality of this temporary tax, enacted by the government in December 2022 to counter the effects of the war in Ukraine and the energy crisis.

Specifically, the constitutional court will review the draft ruling prepared by Judge María Luisa Balaguer regarding the appeal filed by the Community of Madrid against this tax, which applies to fortunes exceeding three million euros. According to sources within the body, the draft supports the legality of this tax, as it is considered not to violate regional competencies.

The majority decision taken in this case, whether it approves or rejects the draft, will set a precedent for resolving other similar appeals. The deliberation will occur during a plenary session addressing various significant issues, some of which have faced delays in their resolution. This anticipates an intense and legally significant debate, as confirmed by the same sources.

In Madrid, taxpayers have enjoyed a 100% discount on this tax for several years. Andalusia joined this practice in 2022, granting a full discount. In Galicia, high incomes received a 25% discount in 2022, which was increased to 50% in 2023. In the case of Murcia, the wealth tax became exempt starting in 2023, although it has not yet had practical effects.

 

Before Christmas

The Constitutional Court began considering this matter in March when it accepted the appeal filed by the government of Juanma Moreno in Andalusia, although it was originally expected that the first case to be resolved would be the one from the Community of Madrid. Therefore, the discussion scheduled for next week aligns with the timeline planned by the Constitutional Court.

The government approved the solidarity tax aimed at large fortunes, along with other temporary levies applied to banks and major energy companies. These measures were taken to counter the effects of the Russian invasion in Ukraine and alleviate the burden on lower incomes. These taxes will initially apply in 2023 and 2024, although the government does not rule out a possible extension.

Nevertheless, the Constitutional Court’s ruling will come after high-net-worth individuals have made an initial payment between July 1 and 31, generating a collection of 623.6 million euros for the public coffers, according to the Ministry of Finance and Public Function’s data.

 

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