The government plans to amend the tax regime applicable to large estates.
At present, such assets are taxed under the Wealth Tax, regulated by Law 19/1991 of 16 June 1991.
As this is a tax ceded to the Autonomous Communities, we find that, depending on the taxpayer’s tax residence in one community or another, the applicable regime varies very significantly, so that the government, with an intended harmonisation, plans to create a new tax, the scope of which we do not know as there is still no regulatory text to regulate it, so that, According to press reports following comments made by the heads of the state tax administration, the new tax will effectively tax these large estates, and the current Wealth Tax will be configured as a kind of payment on account of the new tax, so that the communities where the current tax is not required will de facto see this tax advantage, which eliminates the effect of the call to establish tax residency in them, cancelled.
As we have already explained, as there is still no regulation, it is very difficult to predict what the effects and scope of this tax will be, so we will have to wait for a text to be drawn up to regulate it, although it does present a series of conflictive points before its implementation, such as the following:
- It does not have national scope, as it cannot be applicable to foral territories, so that the intended harmonisation seems to be only for the communities where this tax has been abolished and not for all of them.
- We will have to see how the new tax is organised to avoid double taxation, prohibited by our Constitution of 1979, since, if the current tax seems to be a payment on account, the harmonisation of both taxable events will have to be very clear in order to be able to speak of there being no double taxation. This is bound to generate a great deal of litigation that will undoubtedly end up in the Constitutional Court.
- Historically, the Wealth Tax had a census purpose; it was a tax that allowed the tax authorities to know what the taxable wealth was, basically real estate, when the means to determine it did not exist. For this reason, it is not applied in the European Union, being a clearly outdated tax, which, as it does not exist in our environment, can produce, and this is what is really serious, a mass flight of potential taxpayers for this tax to nearby countries such as Portugal or France, so that not only the intended collection of the new tax is lost, but also the tax on the income generated by this wealth, much higher than the quota applicable to the tax levied on it.
Our Firm has valuable expertise in this area, with lawyers with a long professional career in the tax field ready to advise people who may be affected by this regulatory change
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