10 Keys To Understand The Impacts Of Taxing Large Estates

The new tribute to the richest raises not only impacts in various political, fiscal and financial fields, but also, and in the absence of a text, doubts about the effects it may have among the richest. These are the 10 issues currently on the table.

1. Missing a text . Ignorance of how the tax will be articulated in the absence of text prevents measuring its impact and making decisions. There are unresolved issues such as the condition or not of the holding of shares in family businesses and if it collides with the Wealth tax. “It will be necessary to carefully analyze the rule that is finally approved in order, in light of previous rulings, to be able to determine its possible constitutionality or unconstitutionality,” indicates the expert from KPMG Abogados, in line with the experts from PwC or Ontier consulted.

2. Not applicable in 2022. The creation of the tax cannot be via the Budget Law project, but through a bill, which will make its approval difficult within the current year. It is expected to start in 2023 and would allow estates to maximize their tax planning and structures.

3. Change of residence from Spain. Despite the fact that the key query these days is the possibility of changing tax residence to avoid payment, its practical application will be very residual because it requires certifying residence outside the country for at least 183 days, that is, half a year.

4. Country benefited. Portugal, as a neighboring country, and without wealth tax, would be the most benefited from the departure of investors, if they have incursions into the Peninsula.

5. Election tool. The tax on large fortunes seeks to neutralize the tax advantages of Madrid and Andalusia, two Autonomous Communities governed by the PP, and a short year before the general elections. The prosecutors advocate “updating the regional financing system” so that the regions decide their taxes without intrusions, but knowing that they have to achieve “financial sufficiency” with their tools and not ask for compensation at the national level.

6. Impact on the Autonomous Communities. According to the Government, it will affect 23,000 taxpayers and will collect 1,500 million euros. But the new tax will be deductible in the Wealth Tax, that is, it will be paid by those who do not pay 3.5% for that concept in their CCAA. In other words, it directly affects Madrid and Andalusia because it is not operational and other regions where the rate is less than 3.5%.

7. Capital flight. Experts rule out exits to other countries because the tax taxes wealth regardless of where it is located.

8. Effect on banking. Likewise, financiers reject the idea that private and investment banks can thin their balance sheets, since the tax does not depend on where the assets are.

9. Legal uncertainty. Experts believe that fluctuations in taxation only cause legal insecurity, which breaks a climate of stability to attract foreign investment.

10. Effect on inheritances and donations. Taxing the largest estates could accelerate inheritance, especially in Autonomous Communities with more favorable tax treatment such as Madrid. As explained by a bank, it would consist of dividing the assets and if each of the beneficiaries falls below three million euros, they would not pay taxes, although they would do so for donations, unless they are in cash, and there is also the capital gain of the donor. It would be necessary to do numbers to know if it compensates.

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