The Constitutional Court upheld the solidarity tax on large fortunes levied by the Ministry of Finance, ruling against the challenge from autonomous regions led by the PP. The decision also touched off disputes among Madrid, Andalusia, and Galicia as they assess the tax’s reach and its impact on regional finances.
In a division that included four conservative judges who viewed the tax as unconstitutional and invalid, the court rejected arguments that the measure violated regional financial autonomy. It supported including the solidarity levy in the broader bill that also targets large energy firms and banks.
The chapter on the national tax on large fortunes closes here, yet the regional debate over tax policy continues, centered on whether to maintain lower taxes or to shift the burden to wealthier taxpayers. Madrid had signaled plans to roll back the wealth tax so that revenue could flow to the regional treasury, and Andalusia signaled similar intentions. The Moreno Bonilla government has not disclosed the exact mechanism yet, but officials stated that a technical process is being devised to let taxpayers decide whether to keep paying the tax in Andalusia or at the national level. Sources within the Moreno administration stressed that no one would be compelled to pay the tax in Andalusia.
About 900 great fortunes
Overall, around 900 substantial estates contribute to the regional tax base in Andalusia, with assets valued above 3.7 million euros representing the threshold for the great fortunes category. These taxpayers would be affected by the Board’s new measure and would decide whether Andalusia should continue applying the wealth tax locally or defer to national collection. The wealth held by these fortunes would help fill state coffers if transferred to national administration. Since double taxation is prohibited, taxes do not overlap; if inheritance is paid at the regional level, large fortunes are not taxed again at the state level.
The Board faced criticism for subsidizing assets up to 99% so that taxes would largely not be paid within society. Sixteen thousand Andalusians with inheritances ranging from 700,000 to 3.7 million euros appear in this framework, and those who previously paid assets under the socialist administration in Andalusia, with annual collections near 95 million euros, would continue to owe nothing to the PP. More than 3.7 million individuals will decide where their taxes are settled.
The solidarity tax generated 623 million euros in 2023, according to figures from the Ministry of Finance. This was far below the earlier projection of around 1.5 billion when the tax was created. Only about 12,010 large assets paid the tax, constituting a small fraction of taxpayers in Spain, with an average payment around 52,000 euros in addition to inheritance tax. The tax operates as a temporary measure for 2023 and 2024.
To avoid double taxation, solidarity tax payers are taxed only on the portion of assets not taxed by their autonomous community under the wealth tax. Collections mainly came from large assets in communities that partially or fully subsidized the wealth tax. Madrid and Andalusia aim to avoid overlapping by ensuring the autonomous community collects first, while the state receives its share accordingly.
Assets held by Spain’s ultra-wealthy climbed 37% this year, reaching about 196.13 billion euros, despite the ongoing war in Ukraine and inflation, according to the Forbes rankings.
Concentration of cases in Madrid
Among the 12,010 people who applied for the solidarity tax, most represented large fortunes. Madrid accounted for about 10,302 taxpayers contributing 555 million euros. Andalusia followed with 865 high-net-worth individuals paying 29.7 million euros, and Galicia reported 91 large holdings contributing 9.8 million euros. Collectively, these three regions accounted for more than 95% of taxpayers and revenue.
The conflict intensified after Andalusian President Juan Manuel Moreno announced in September 2022 that Andalusia would abolish the wealth tax, mirroring Madrid as one of the first major moves by his government. He argued that abolishing the tax, combined with reductions to regional portions of the personal income tax during an inflationary period, would attract wealthy residents and stimulate tax revenue through other channels. Supporters contended that the tax was outdated in Europe and that some wealthy Andalusians had relocated to avoid it in Portugal, reinforcing the argument for changes within Andalusia.
As other regions like Murcia and Galicia floated potential adjustments, and Valencia hinted at cuts ahead of regional elections, the Ministry of Finance stepped in to stabilize the fiscal landscape. The government pursued a broader anti-crisis plan and social shield to support vulnerable families, even as inflation persisted amid Russia’s war with Ukraine. The treasury ultimately issued the capitalized wealth tax as a measure approved by the Constitutional Court, while the Board continues to evaluate how collections could be adjusted without infringing on regional powers.
The Board acknowledged the constitutional provision but argued that its creation did not无stand. It expressed concern that similar approaches could be used to shrink other fiscal autonomies, such as inheritance and gift tax incentives, or other tax-reduction measures in Andalusia. The Government of Moreno Bonilla continues to press for fiscal autonomy while balancing national policy goals.
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