Following the publication of Judgment no. 149/2023, of November 7, 2023, by which the Plenary of the Constitutional Court dismissed the appeal of unconstitutionality filed by the Governing Council of the Community of Madrid and endorsed the Temporary Solidarity Tax on Large Fortunes (“ITSGF“) in Spain for the financial years 2022 and 2023, several Autonomous Communities have reacted to adapt the regional regulation of the Wealth Tax (“PI“). The objective of these modifications has been, in general, to ensure that the collection that would otherwise have corresponded to the ITSGF ends up in the regional coffers.
In this regard, it should be remembered that the ITSGF came into force in 2022 as a state tax complementary to the traditional Spanish IP, since its regulation is practically exact and its quota is deductible from that of the former to avoid double taxation. The main differences in the configuration of these two taxes are:
(i) The verification and collection of the ITSGF is reserved exclusively to the State, while the Autonomous Communities assume these powers in relation to the IP.
(ii) The Autonomous Communities cannot assume any regulatory competence over the ITSGF, unlike the IP, in which they have the right to regulate certain issues such as the exempt minimum, the rate and the deductions and bonuses of the quota.
The coordination between the IP and the ITSGF meant de facto that, if a given Autonomous Community subsidized the IP, the taxpayer did not stop paying a wealth tax, but simply paid it to another administration (the State). This effect of diversion of revenue is what has led some Autonomous Communities to react and try to ensure revenue in the face of the impossibility of maintaining the tax benefit. The following is a summary description of the different formulas that have been used to try to achieve this objective.
