Spain's new ‘solidarity tax’ on large fortunes announced in September 2022, has now been introduced to parliament as an amendment to the non-government Bill on temporary taxes on banks and energy companies.
The new tax will apply to the very rich, a term which has not yet been defined, although it is expected to affect less than 1% of the population.
The new tax is supposed to be a temporary measure implemented for the first two tax years after its accrual once it enters into force, and this will depend on the circumstances at the time, including the duration of the war in Ukraine. Once this period has elapsed, the so-called "review clause" introduced in the text will be activated, allowing the government to evaluate its results to decide whether to maintain or abolish it.
The solidarity tax taxable base consists of the taxpayer's net wealth, calculated according to the wealth tax rules. There is a minimum exemption of €700,000, which applies only to resident taxpayers.
There are additional exemptions applying to net wealth on the same terms as provided in the wealth tax law. Thus, for instance, exemptions such as the primary residence (up to €300,000) or the family business are transferred to this tax.
Exemptions for the value of an individual's business will be calculated in the same way as for wealth tax. The rates will be calculated in bands, with rates of 1.7 per cent on assets from EUR3 million to EUR5.35 million, 2.1 per cent on the next EUR5.3 million and 3.5 per cent on assets above EUR10.7 million. Where an individual is liable for both wealth tax and solidarity tax, the wealth tax liability will be credited against the individual's liability to solidarity tax for the year. The combined total of an individual's income tax, wealth tax and solidarity tax liabilities cannot exceed 60 per cent of the individual's taxable income, subject to paying a minimum 20 per cent of the solidarity tax.
Deductions from the solidarity tax will be allowed for overseas wealth taxes paid on the same assets, although taxpayers who are not EU residents will have to appoint a legal representative in Spain to handle their claims.
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