BackThe recent approval before the Constitutional Court of the Solidarity Tax on Large Fortunes (ISGF) has clearly marked the tax landscape, given the debate that this tax has sparked.
This tax, designed, in principle, on a temporary basis for the tax years 2022 and 2023, has been conceived as a measure to counteract the total or partial exemptions and allowances that exist in some autonomous communities with respect to Wealth Tax, as in the case of the Community of Madrid or Andalusia.
This tax was born with a tax collection purpose. Its similarity with the Wealth Tax reaches the point that, in the ISGF, it allows the deduction of the Wealth Tax quota paid at the regional level from the ISGF quota.
This means that, as long as the Wealth Tax is not fully subsidised, the ISGF will not be levied. This tax is therefore complementary in nature to the Wealth Tax.
On the other hand, only in cases where the Wealth Tax liability is zero or less than that of the ISGF, the payment of the difference will be required.
This new tax affects high net worth individuals in several regions of Spain, including Andalusia, Madrid, Galicia, Catalonia, Murcia, Asturias, Cantabria and the Balearic Islands.
The taxpayer of the ISGF is an individual resident in Spain whose net wealth exceeds EUR 3,000,000 at the date of accrual of the tax (31 December 2022 and 2023). With a minimum exemption of EUR 700,000, the tax is only levied on net assets above EUR 3,700,000.
The deadline for filing the ISGF is from 1 to 31 July 2023, by filing form 718. The filing and payment process is exclusively carried out telematically.
The ISGF has a progressive tax structure, with rates varying according to the range of wealth:
- 1.7% for assets between 3 and 5.3 million euros.
- 2.1% for assets between 5.3 and 10.6 million euros.
- 3.5% for assets exceeding EUR 10.6 million.
The tax base of the ISGF is calculated on the basis of the taxpayer’s net worth, which is the difference between its assets and liabilities. The rules for valuation and determination of the tax base are the same as those for Wealth Tax, including the applicable exemptions and the minimum exemption of EUR 700,000.
It is important to note that taxpayers are obliged to file a tax return if the tax liability is payable after applying the corresponding deductions or allowances.
In order to calculate the Wealth Tax liability, the statement of wealth as at 31 December of the previous year must be considered. The filing process is carried out using form 714, with a deadline of 30 June. The assets that can be declared are diverse, including shares, real estate, bank deposits, jewellery, among others.
It is important to bear in mind that the management of Wealth Tax is devolved to the autonomous regions, which can lead to differences in the regulations and tax rates applicable depending on the region. This lack of uniformity has led to the creation of the ISGF, which seeks to address disparities in the taxation of higher incomes and avoid regional exemptions.
At B LAW & TAX we are experts in international and high net worth taxation. If you have any concerns about the application of this tax, do not hesitate to consult us for a better management of your personal wealth.
B Law & Tax International Tax & Legal Advisors.
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