B Law & Tax
04 December 2023

Tax advisor: Wealth Tax: Updates, Declaration, and Connection with Wealth

One of the main fiscal novelties is the introduction of the Solidarity Tax on Large Fortunes or the Temporary Solidarity Tax on Large Fortunes. This is a temporary tax applicable for the fiscal years 2022 and 2023, although there is a possibility that it may continue to be in use after its review. We explore how this new tax affects and relates to the Wealth Tax, as well as the calculation method in case one has to deal with this tax during the 2022-2023 fiscal year.

 

Countering Regional Exemptions

The Wealth Tax,  is a direct and personal tax that complements the Property Tax.

Its purpose is to counteract exemptions in autonomous communities, such as Madrid and Andalusia, concerning the Property Tax.

To avoid double taxation, it is allowed to deduct the autonomous Property Tax from the Wealth Tax. This new tax affects large fortunes in various regions of Spain.

Individuals residing in Spain with a net worth exceeding 3,000,000 euros on the tax accrual dates (December 31, 2022, and 2023) are considered taxpayers of this tax. It is important to note that, due to a minimum exemption of 700,000 euros, the tax will only apply to net assets exceeding 3,700,000 euros.

 

Wealth Tax Declaration: Process and Deadlines

The Wealth Tax declaration must be made during the period from July 1 to July 31, 2023, using form 718. This form will be exclusively available in electronic format, and its submission and payment will be carried out electronically, utilizing the assistance forms provided on the Tax Office’s website. There will also be the option to obtain a file with the declaration for online submission.

Structure and Regulations of the Temporary Solidarity Tax on Large Fortunes

The temporary solidarity tax on large fortunes has a progressive tax rate, ranging from 1.7% to 3.5% depending on the wealth range. The taxable base includes net assets, determined by the difference between the taxpayer’s assets and rights and their debts, following the same rules as the Wealth Tax. Similar exemptions exist, such as the minimum exemption of 700,000 euros. Those whose tax due results in payment after applying the required rules and deductions must file the corresponding declaration.

 

Procedures and Variables in the Wealth Tax Declaration and its Relationship with the Solidarity Tax

The Wealth Tax is calculated considering the state of the assets at the end of the fiscal year, with the filing deadline until June 30 using form 714. Various assets, such as stocks, real estate, life insurance, among others, must be declared. The valuation of certain assets follows the rules established by the Wealth Tax Law.

The management of this tax varies among autonomous communities, creating differences in exemptions, deductions, and rates. The lack of uniformity has led to the creation of the Solidarity Tax, aimed at higher incomes to avoid regional exemptions.

 

In summary…

The introduction of the Solidarity Tax on Large Fortunes is a significant fiscal novelty for the years 2022 and 2023, with the possibility of extension. This complementary tax to the Wealth Tax aims to counteract regional exemptions, especially in communities like Madrid and Andalusia. The declaration of the Wealth Tax must be made between July 1 and July 31, 2023, using form 718 electronically. With a progressive tax rate ranging from 1.7% to 3.5% based on the wealth range, it applies to those with a net worth exceeding 3,000,000 euros. The uneven management of the Wealth Tax among autonomous communities has led to the creation of the Solidarity Tax, targeting higher incomes to avoid regional discrepancies.

 

 

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