The President of the Community of Madrid, Isabel Ayuso, led the first judicial challenge to the new wealth tax of three million euros. The Governing Council of the Community of Madrid filed an objection on January 31 with the Constitutional Court, arguing the tax is unconstitutional and requesting a precautionary suspension. The Constitutional Court must decide whether to accept the objection and whether to grant a suspension. Meanwhile, banks and energy companies continue to seek judicial avenues to challenge the taxes imposed by the government on their income.
The objection represents the sole court action taken so far against the new wealth tax in Madrid, though the move has also been announced by the Andalusian regional government and the Catalan Employers’ Association Foment del Treball. A leading figure, Josep Sanchez Llibre, addressed taxpayers with a net worth exceeding three million euros, urging them to file the relevant management resource and deduct their taxes as they pay, so they can recover them if the measure is later ruled unconstitutional. The deadline for declaring the new tax on large fortunes will be established by a forthcoming ministerial order from the Treasury. In any case, the liquidation will occur after the wealth tax declaration deadline, which is set until June 30, since the amount paid under the latter will be credited against the new tax balance. According to a document obtained by EL PERIÓDICO DE CATALUNYA from the Prensa Ibérica group, the Madrid appeal rests on five legal grounds.
Procedure Violation
Officials say the appeal questions the parliamentary process used to create the new tax. The measure emerged not from a single bill but, rather, as an amendment to another bill addressing banking and energy taxes, despite the seriousness of the issue and the need for a full legislative procedure. The appeal argues that this path limited other groups from proposing changes to the regulation in the Congress of Deputies and thus violated the constitutional right to political representation in Article 23.2. Additionally, using a bill tool promoted by the parliamentary groups of PSOE and Unidas Podemos prevented an essential hearing and the preparation of a report, which could otherwise be requested from the Council of State.
Improper Tax Harmonization
The second argument contends that creating a new tax attempted to improperly harmonize the regulatory powers vested in autonomous communities regarding wealth taxation. The norms forming the constitutional block were designed for that purpose. The appeal notes that the taxable event of the new federal solidarity tax is the wealth tax (net worth) above three million euros, which overlaps with the pre-existing wealth tax (started at 700,000 euros) and its collection has been shifted to the autonomous communities. The new tax appears to negate the relief previously established by the wealth tax approved by Madrid, creating a 100 percent credit for Madrid residents with wealth above the threshold. The appeal asserts that changing the allocation conditions of the wealth tax to harmonize inheritance taxation bypassed the legally required procedure for establishing a new tax, constituting, in their view, a genuine fraud.
Retroactive Effects
From Madrid’s perspective, the new tax is said to take effect for the entire 2022 fiscal year, though its entry into force on the last days of that year is described as a retroactive step that increases tax debt without sufficient justification and runs counter to the principle of legal certainty in Article 9.3 of the Constitution.
Confiscating Elements
As a fourth legal point, the General Advocacy for Madrid’s Community Court argued that the tax structure does not reflect the economic reality allowed by Article 31.1 of the Constitution and may present an unrealistic or speculative wealth scenario. The new tax tier system applies three rates (1.7 percent, 2.1 percent, and 3.5 percent) to a three million euro net worth. Given current economic indicators, an expert investor emphasizes the potential confiscatory nature of the measure, noting that returns imagined under these rates are unlikely to be realized.
Financial Autonomy
The appeal also claims the levy weakens the fiscal autonomy of autonomous communities, particularly Madrid, by disregarding their existing regulatory powers over devolved taxes, and challenges the principles of fiscal coordination and mutual responsibility. Madrid argues that fiscal autonomy encompasses not only the ability to create or raise taxes but also to reduce or repeal them, and that the new arrangement effectively erodes the regional government’s option to subsidize wealth taxation completely.
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