13/04/23

EUROPE: Mallorca multimillionaires unaffected by Spain's solidarity wealth tax.

As published on majorcadailybulletin.com, Thursday 13 April, 2023.

It is the period for making tax declarations in Spain, and the country's multimillionaires face an additional tax this year. This is the Spanish government's temporary solidarity tax on "grand fortunes". Partly a means of revenue generation following the pandemic, this tax is also one for "social justice" in that it addresses an imbalance in the way that existing regional wealth tax is applied - but only up to a point.

There are two regions of Spain - Andalusia and Madrid - where a wealth tax exists only notionally. This is because there are 100% discounts. No wealth tax is therefore paid. At the other end of the scale are three regions where percentages of wealth tax are the highest in the country - Extremadura, Valencia and the Balearics.

As a percentage of the population, the Balearics have the highest number of millionaires in Spain. And yet the solidarity tax will not affect them. A tax on net wealth of three million euros and more, the rates are lower than in the Balearics. The difference is significant. Wealth of four million euros has been taken as a point of reference, e.g. by the General Council of Economists. In Andalusia and Madrid, the tax will be 5,100 euros. In the Balearics it is already 50,000 euros, and as the regional tax is that much higher, the state tax doesn't apply.

The Balearic government collected 85 million euros last year thanks to the wealth tax, 12% more than the previous year. The main opposition party, the Partido Popular, have said that they will scrap the regional tax if they win the election in May (or discount it to 100%); the PP govern in Andalusia and Madrid.

As to the solidarity tax, it is temporary in that, for now, it only applies to the years 2022 and 2023.