B Law & Tax
29 September 2023

Tax advisor: When to challenge the Temporary Solidarity Tax on Large Fortunes to obtain a tax refund?

The Wealthiest Citizens Have Already Paid the Temporary Solidarity Tax on Large
Fortunes, especially in Madrid, which has contributed 89% of the total revenue. Most
have followed the unanimous advice of tax experts: make the payment and then file
an appeal. However, here arises a delicate issue: When is it appropriate to challenge
the wealth tax?

Because doing it too early or too late can have dire consequences for the taxpayer.
The key to nullifying the tax lies with the Constitutional Court, which has accepted
several challenges on the grounds of unconstitutionality.

If the High Court overturns the tax and applies the same jurisprudence it established
with the municipal capital gains tax, only those taxpayers who have previously filed a
refund request will benefit from the ruling. Therefore, if an appeal has not been filed
before the Constitutional Courts decision, the money cannot be recovered.

There is a significant risk if it is filed too early. This recourse must first be filed
administratively with the Economic-Administrative Courts of each autonomous
community. And when they respond by denying the claim, one must turn to the
regular courts.

According to the General Council of Economists, if the refund request is filed
prematurely and the Economic-Administrative Court responds before the
Constitutional Court ruling, it may be necessary to incur legal costs related to
lawyers and solicitors.

When Will the Constitutional Court Rule?

The key lies in when the Constitutional Court will issue its ruling. Some media outlets
have speculated that this could happen before the end of the year, but judicial timelines are unpredictable. Therefore, taxpayers who have paid the wealth tax have no choice but to assume a certain level of risk.

The risk of losing the money if the Constitutional Court makes a decision earlier than
anticipated is significant. The advice from economists is to assess the cost of taking
the case to court compared to the amount the taxpayer could recover. Anyone who
has paid a substantial sum should challenge the wealth tax and not take the risk.

These experts believe that there are strong grounds for the challenges against the
tax from three different perspectives. The first relates to its approval through an
amendment to another bill unrelated to this matter, which is perceived as a way to
“bypass the legislative process”.

The second perspective relates to the encroachment on the competences of the
autonomous communities. Lastly, it is argued that the tax also violates two other
fundamental principles of tax regulations: it has a retroactive effect, which constitutes
a breach of the principle of legal certainty, and it also contravenes the principles of
economic capacity and non-confiscation, as the rates on the scale do not align with
economic reality and represent a fictional or unreal wealth.



B Law & Tax International Tax & Legal Advisors.


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