B Law & Tax
27 February 2024

Temporary tax on large fortunes in spain: what now?

Following its declaration as constitutional, an extension of Royal Decree-Law 8/2023 has been approved, extending its validity indefinitely.  

Several autonomous communities have adjusted their Wealth Tax regulations in order to maximise the collection of wealth tax.  

On 28 December 2022, Law 38/2022 was published in the Official State Gazette (BOE), which, in its Article 3, gave the green light to the creation of the Temporary Solidarity Tax on Major Fortunes (ITSGF), initially valid for the tax years 2022 and 2023. 

In short, the ITSGF is a state tax created to increase revenue and standardise regional regulations. It is levied on the net wealth of individuals exceeding EUR 3,000,000, with a minimum exemption of EUR 700,000 for residents. It came into force on 31 December 2022. 

In general terms, the ITSGF calculates the amount to be paid taking into account what has been paid in IP. This mainly impacts taxpayers in communities without IP allowances. The regulation considers the full tax liability, not the rebate, which has resulted in a lower than expected collection of €623 million.

Between December 2022 and July 2023, communities such as Andalusia, Galicia and Madrid, which subsidise the IP, challenged the ITSGF before the Constitutional Court (TC) requesting its suspension. In April 2023, the TC admitted the appeals but rejected the precautionary suspension. In November 2023, it issued rulings confirming the validity of the tax, although four judges voted against it. 

Although there are other avenues to challenge the tax’s conformity with domestic and EU law, several autonomous communities have already amended their IP regulations (with effect from 2023) to withhold the expected collection of the ITSGF in their respective territories.Finally, Royal Decree-Law 8/2023 was published in the Official State Gazette of 28 December 2023, which adopts measures to address the economic and social consequences of the conflicts in Ukraine and the Middle East, as well as to mitigate the effects of the drought.  

Among the tax measures in this regulation, three directly affect the ITSGF:

The application of the ITSGF is extended indefinitely from 2024, until a review of the regional financing system. The minimum exemption of €700,000 for non-residents is extended retroactively. Telematic filing of tax returns becomes mandatory, subject to discussions on taxpayers’ rights. While legal proceedings continue, the tax remains in force, with a thorough review of family wealth recommended to mitigate its impact, including compliance with exemptions related to family businesses.

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