The tax on large fortunes -recently proposed legislation-

Last Tax Hour

On Thursday 10 November 2022, the text that the Government intends to approve to create the so-called Tax on Great Fortunes saw the light of day. This proposal has been made through an amendment to the Proposed Law for the establishment of temporary taxes on energy and credit institutions and financial establishments, jointly presented by the PSOE-Unidas Podemos parliamentary groups.

The new Tax on Great Fortunes would come into force in 2022, i.e. it would be obligatory to declare it in 2023 for the net wealth owned on 31 December 2022, taxing fortunes exceeding 3 million euros and being able to deduct the tax on wealth declared in those autonomous communities that manage it, but without ceding this new tax to these communities.

The Tax on Great Fortunes, pending approval by the Cortes Generales, would apply the same rules as the wealth tax to determine taxpayers, exemptions and to determine the taxable base, i.e. taxing the same taxable event and the net wealth as the taxable base, by difference between the value of the assets and rights owned by the taxpayer and the charges and encumbrances of a real nature, when these diminish the value of the respective assets or rights, and the personal debts or obligations for which the taxpayer is liable.

The lines that summarise the proposal are as follows:

1. Complementary:

It is a tax of a direct, personal and “complementary” nature to the Wealth Tax.

2. Accrual:

It would accrue on 31 December of each financial year and, in principle, would only be applied in two financial years, although its continuation at a later date would be valued.

3. Taxable event:

It is levied on the taxable event of owning net wealth, in the same taxable persons as the existing wealth tax (individuals), in excess of 3,000,000 euros.

4. Taxable Base:

This taxable base will be calculated by applying the rules of Chapter IV of the LIP, with a minimum of 700,000 euros being exempt.

5. Limits:

The important detail comes in the limits to the full tax liability together with the personal income tax and wealth tax liability, as this liability may not exceed, for taxpayers subject to the tax by personal liability, 60% of the sum of the personal income tax bases. For these purposes, the rules on the limit of the full amount of Wealth Tax, established in Law 19/1991, of 6 June, on Wealth Tax, shall be applicable, although, in the event that the sum of the amounts of the three taxes exceeds the above limit, the amount of this tax shall be reduced until the limit indicated is reached, without the reduction being able to exceed 80%.

6. Scale of taxation:

The scale of taxation applicable will be as indicated in the following table:

NET BASE	QUOTA	REMAINING NET BASE	APPLICABLE TYPE
0,00	0,00	3.000.000	0,00%
3.000.000,00	0,00	2.347.998,03	1,70%
5.347.998,03	39.915,97	5.347.998,03	2,10%
10.695.996,06	152.223,93	En adelante	3,50%

Other details to be taken into account:

In the case of a personal obligation to contribute (foreigners), the deduction for taxes paid abroad will be applied in accordance with the terms established in the LIP.

On the other hand, as is well known, wealth tax is subsidised in some Autonomous Communities such as Andalusia and Madrid, where the subsidy reaches 100% of the tax payable, although the obligation to file a tax return is always maintained. In those regions in which wealth tax is paid, the wealth tax liability for the year actually paid may be deducted when settling this tax on large fortunes.

The powers of management, settlement, collection, inspection and review of the tax correspond to the State (and not to the Autonomous Communities), i.e. the Central Government will be in charge of collecting this new tax, so its constitutionality will be debatable, as it has the same taxable event and taxpayers, among other things, as the existing wealth tax managed by the Autonomous Communities.

Those taxpayers whose tax liability, after applying the appropriate deductions or allowances, is payable are obliged to file a tax return.

Taxpayers who pay tax directly to the State are not obliged to file a tax return, as the Wealth Tax yield is not assigned to any Autonomous Community, unless the tax liability for this tax is payable.