Spain’s short-term tax on the tremendous wealthy (impuesto de solidaridad a las grandes fortunas) is often known as the millionaire’s tax or solidarity tax. It is a tax on folks value greater than €3 million and it is not a tax on earnings, however quite on belongings and holdings.
It was launched by the nation’s left-wing coalition in an try to assist Spaniards climate the financial storm of the cost-of-living disaster. However as of September 2023, round a yr after the tax measure was first introduced in, the Spanish authorities reported that it had raised €623 million in income, a good quantity however significantly lower than the preliminary projection of €1.5 billion. We now could know why that’s.
In keeping with tax information, the millionaire’s tax focused simply 12,010 payers, which represents barely 0.1 p.c of the overall taxpayer base in Spain.
On common these high-worth people every paid €52,000, which is complementary to the Wealth Tax (impuesto patrimonio).
Nonetheless, although it was presupposed to be a brief tax measure, there’s now some uncertainty about precisely how short-term it’ll be within the long-run. The federal government has been making non-comital noises as of late, and amid the uncertainty many rich Spaniards have begun looking for methods round paying it and making an attempt to cut back their wealth tax invoice total.
READ ALSO: When will Spain’s millionaire tax be scrapped?
Donations
Plenty of it comes right down to ‘donations’ to be able to make the cash non-taxable or to cut back the taxable base on paper.
Spanish tax consultancy corporations consulted by elEconomista.es report a rise in requests for assist arranging ‘donations’ from mother and father to youngsters or spouses in recent times, in addition to the arranging inheritance agreements within the areas that permit deductions to offset the tax burden of the millionaire’s tax.
Commercial
Donations are typically performed via cash and shares, however donating properties additionally appears to be a means of avoiding further taxes, though property donations can work out costlier because of the procedures to be adopted and the taxes to be paid on property transactions in Spain.
The goal is to keep away from paying the millionaire’s tax by splitting up the fortune, primarily as a result of donations between relations is a strategy to scale back the extent of wealth (on paper) and thus preserve it beneath €3 million, the taxable base from which the millionaire’s tax is levied.
This trick is much more helpful in areas the place donations are subsidised, equivalent to Madrid and the Balearic Islands, the place inheritance agreements could be made, as a result of any capital achieve generated by the donation isn’t taxed.
READ ALSO: Inheritance tax in Spain – Do you have to go your property on to your youngsters or promote it to them?
Commercial
Enterprise capital corporations
One other methodology more and more utilized by the rich appears to be organising and placing cash in enterprise capital or personal fairness corporations.
In keeping with Spain’s Nationwide Securities Market Fee, the creation of enterprise capital corporations has grown by 38 p.c because the authorities first introduced the millionaire’s tax.
Siro Barro, associate accountable for tax legislation at Escalona de Fuentes, informed El Economista that organising enterprise capital corporations are interesting as a result of 60 p.c of the funding made by making a fund or fairness could be exempt from each types of tax in sure circumstances.
Tax consultants count on the development of making and investing by the wealthiest taxpayers into personal fairness entities to proceed to rise so long as the solidarity tax continues to exist, as with the donations loophole.
With the federal government but to stipulate when this supposedly short-term tax shall be scrapped (if in any respect), it appears these types of tips, whether or not via donation or enterprise capital funding, are right here to say.