On 22nd September 2022, Spain's Minister of Finance, María Jesús Montero, announced plans to introduce a new tax on the very rich.
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.
It will be introduced with effect from 1st January 2023 for a temporary period of possibly two years, after which a decision will be made whether to extend it, and this will depend on the circumstances at the time, including the duration of the war in Ukraine.
No further details have been revealed regarding the level of the tax or the form it will take, such as whether it will be a tax on income or wealth, as the government is still working on those aspects. A new tax would require new legislation, whereas an existing tax can be modified and approved in the annual State Budget.
Spain has a wealth tax (Impuesto sobre el Patrimonio) which is fully devolved to the 17 Autonomous Regions (Comunidades Autónomas) of Spain, with each Region having the authority to set their own wealth tax rates, allowances and reductions.
Madrid applies a 100% tax credit for wealth tax purposes, meaning that wealth tax has effectively been abolished in that Region. Andalucía has recently announced that it will follow in the footsteps of Madrid and eliminate wealth tax with effect from 31st December 2022. Murcia has also declared it is considering doing the same, and Galicia has increased the wealth tax credit from 25% to 50%.
Montero openly criticised these regions for taking such steps which she said were irresponsible. However, such steps are outside the control of Central Government. By introducing a new central tax, this will allow the Central Government more control over how it operates.
It is understood that in cases where an individual is liable for both wealth tax and the new tax, it is expected that the new tax will be credited against the individual's wealth tax liability for the year.
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