In the last plenary session of the Congress of Deputies on November 24, the new Temporary Solidarity Tax on Large Fortunes was approved, which cannot be transferred to the Autonomous Communities, and its proceeds will be used to finance policies to support the most vulnerable.

The new tax, which was created as a complement to the Wealth Tax, is levied on the wealth of individuals with a net worth of more than 3,000,000.00 euros and will be in force (in principle) for the years 2022 and 2023.

According to the wording of the aforementioned tax, “the net worth of the individual shall constitute all the assets and rights with a financial value that they own, minus any charges and encumbrances that reduce their value, as well as the debts and personal obligations for which they are liable“.

As regards the territorial scope of application, the Temporary Solidarity Tax on Large Fortunes will be applied throughout the territory of Spain, without prejudice to the agreed local tax regimes and the Economic Agreement in force in the Historical Territories of the Basque Country and the Jurisdictional Community of Navarre respectively, and notwithstanding the provisions of any international Treaties or Agreements that have become part of domestic legislation. In this sense, the above Communities will have to approve (or may not approve) their own Solidarity Tax.

A singularly important issue in this new tax is that assets and rights that are already exempt under Law 19/1991, of June 6, 1991, on Wealth Tax, will remain exempt. For example: shares in a family business, assets and rights required by individuals for the development of their business or professional activity, certain works of art, the habitual residence up to a maximum amount of 300,000.00 euros, etc.

A curious feature of this tax is that taxpayers who are not resident in Spain or in another Member State of the European Union will be obliged, before the end of the tax period, to appoint a natural person or body corporate that is resident in Spain to represent them before the Tax Authorities in relation to their obligations for this tax.

In the case of personal liability, i.e., for tax residents in Spain, the taxable base will be reduced, as a minimum exemption, by 700,000 euros. Also curious is the discriminatory wording describing the application of this reduction, in that it distinguishes between a tax resident in Spain and a non-resident, given that the Wealth Tax does expressly provide for the application of this reduction to non-residents (art. 28.Three.).

As for the accrual of this new tax, this will occur on December 31 of each year, which in principle will be the years 2022 and 2023.

The gross tax payable will result from applying the following rates to the taxable income brackets shown in the table below:

It is also provided that, for taxpayers who are personally bound to pay income tax, the total amount of this tax, together with the Personal Income Tax and Wealth Tax amounts due, may not exceed 60% of the sum of the taxable bases on which the Tax on Large Fortunes is payable.

From the tax liability that results from application of the above paragraphs, the taxpayer may deduct the Wealth Tax liability for the year actually paid. In other words, internal double taxation is eliminated if the taxpayer has previously paid the corresponding Wealth Tax.

The Temporary Solidarity Tax on Large Fortunes approved yesterday, provides for a self-assessment regime of the kind that applies to Personal Income Tax and the Wealth Tax, but it will be necessary to wait for the corresponding ministerial order from the Ministry of Finance and Public Function that approves the declaration, the place, form and deadlines. In this sense, the form for remote presentation of this self-assessment should have been drafted, but this was not provided for.

Finally, for those taxpayers who cannot pay this tax due to lack of funds, the law offers the possibility of paying the tax debt by means of the handover of goods that form part of Spain’s historical heritage, as are registered in the General Inventory of Personal Property or in the Register of Assets of Cultural Interest, in accordance with the provisions of article 73 of Law 16/1985, of June 25, 1985, on Spanish Historical Heritage.

In my opinion, this new tax will have face difficult legal and constitutional obstacles, because the powers of the Autonomous Communities have been restricted, and a certain kind of “discrimination” can be seen with respect to non-resident taxpayers who are bound by a real obligation to pay tax, as far as non-application of the reduction in the amount of 700,000 euros is concerned. We will see how the Courts rule on this matter.