On December 28, Law 38/2022 of December 27 came into force, creating the Temporary Solidarity Tax on Large Fortunes and amending certain tax regulations. The main new features are summarised below.
- Temporary Solidarity Tax on Large Fortunes (“ITSGF”[1])
On the one hand, the Temporary Solidarity Tax on Large Fortunes is created to complement the current Wealth Tax and aims to harmonise the taxation of wealth over EUR 3 million at the national level. This tax will be applied in 2022 and 2023, although it is expected that it could be extended over time.
In general terms, the configuration of the new tax basically coincides with that of the Wealth Tax, the main distinguishing features being the following:
- Taxpayers: the same as in Wealth Tax, i.e. (i) natural persons who have their habitual residence in Spanish territory, who will be taxed on their global net wealth – unlimited tax liability- and (ii) non-resident natural persons, on assets and rights located or enforceable in Spain – limited tax liability. This second section would include persons covered by the Beckham regime.
- Taxable event: is constituted by the taxpayer’s ownership, as of 31 December of each year, of net wealth over EUR 3,000,000.
- Exemptions: the same exemptions apply as for Wealth Tax (i.e., family business, historical heritage, primary residence, etc.). In addition, taxpayers subject to unlimited tax liability have an additional minimum exemption of EUR 700,000, as well as the exemption of EUR 300,000 for the primary residence. While non-resident taxpayers in Spanish territory and those taxed under the Beckham regime – limited tax liability – will not be able to benefit from either of the two exemptions.
- Tax base: this will be made up of net wealth, applying the same valuation rules as for Wealth Tax.
- Tax rates: Depending on the value of the wealth, the following scale will be applied:
| Tax Base (EUR) | Tax rate |
| Up to 3,000,000 | 0% |
| Between 3,000,000 and 5,347,998.03 | 1.7% |
| Between 5,347,998.03 and 10,695,996.06 | 2.1% |
| Over 10,695,996.06 | 3.5% |
- Joint Limit: for taxpayers subject to unlimited tax liability, the full amount of this tax, together with the Personal Income Tax (“IRPF”) and Wealth Tax payments, shall not exceed 60% of the tax bases for Personal Income Tax. In this sense, the same rules apply as in the Wealth Tax. In case the sum of the fees exceeds the aforementioned 60%, the ITSGF payment will be reduced until reaching this limit, with a maximum reduction of 80% of the amount of the Tax.
- Deductions: taxes paid abroad and the amount of Wealth Tax for the year already paid can be deducted.
There are many particularities regarding this new tax (for example: its possible non-constitutionality, the way of calculating the joint limit in those Autonomous Communities where the Wealth Tax is subsidised, the exemptions of the family business, etc.), so we recommend a detailed analysis of each specific case.
- Indirect ownership of real estate in Spain
On the other hand, a modification is introduced in the Wealth Tax Law, which allows the indirect ownership (i.e., through non-resident entities) of real estate in Spain to be taxed. This measure takes effect from the fiscal year 2022 and concerns the Temporary Solidarity Tax on Large Fortunes.
In short, a non-resident natural person (or under the Beckham regime) with shares in a non-resident entity in Spain, at least 50% of the assets of which consist, directly or indirectly, of real estate located in Spain, will be subject to Wealth Tax and in turn to Tax on Large Fortunes, in both cases due to limited tax liability.
In this respect, to determine whether more than 50% of the entity consists of real estate in Spain, the net book values of the assets must be replaced by the market values as of 31 December of the year in question.
For natural persons, who could be affected by this new measure, it is recommended to review their real estate investment structures in Spain in order to analyse potential applicable tax measures or benefits (exemptions per Autonomous Community or family business).
[1] “ITSGF” for the initials in Spanish: Impuesto Temporal de Solidaridad de las Grandes Fortunas.
