The Supreme Court has issued two recent rulings (October 29 and November 3) that represent a significant change in the interpretation of the Wealth Tax (WT). Until now, administrative doctrine prevented non-resident taxpayers from benefiting from the cap on the total tax liability established in Article 31 of the Wealth Tax Law. This cap sets that the maximum amount payable cannot exceed 60% of the taxable base for Personal Income Tax, provided that the reduction does not exceed 80% of the initial tax amount.
This tax applies to the net wealth of individuals when certain thresholds are exceeded. Tax residents in Spain must declare their worldwide assets, while non-residents only declare assets and rights located in Spain.
What did the Supreme Court say?
The exclusion of the cap for non-residents created a difference in treatment that the Supreme Court considered contrary to the principle of equality and non-discrimination. The High Court states that residence cannot be an obstacle to applying the cap, especially when there are mechanisms to determine the taxpayer’s worldwide income through European regulations and international treaties.
What does this decision mean?
As a result of these rulings, non-residents required to file the Wealth Tax can also apply the cap under Article 31 of the Wealth Tax Law. This provides relief in situations where the tax could be disproportionate compared to the income earned.
Why is this relevant if you are a non-resident?
Because if you have paid Wealth Tax in recent years as a non-resident, this interpretation opens the door to reviewing your situation and, if applicable, recovering part of what you paid. It is an opportunity to correct a criterion that until now created inequality.
At Cabrera Rodríguez ETL GLOBAL, we closely monitor these developments to provide clear and up-to-date information. If you have questions about how this may affect you, contact us to assess possible actions.
Carlos Manrique de Lara Correa
Lawyer en CABRERA RODRIGUEZ ETL GLOBAL
