In the Spanish tax system, double taxation on wealth has gained significant relevance since the creation of the Temporary Solidarity Tax on Large Fortunes (ITSGF).
This new levy complements the traditional Wealth Tax (IP) and has raised many questions among taxpayers.
In this article, we explain how both taxes work, the differences between autonomous regions, and how we help you optimize your tax planning.
What Is the Temporary Solidarity Tax on Large Fortunes (ITSGF)?
The ITSGF was approved at the end of 2022 with a temporary nature, applicable to fiscal years 2022 and 2023, although its continuation remains under review.
Its main objective was twofold:
1. Increasing State Revenue in Uncertain Times
The government aimed to generate additional income in a context of economic crisis, inflation, and fiscal tension.
2. Harmonizing the Taxation of Large Fortunes
The ITSGF was designed to prevent high-net-worth individuals in certain regions — such as Madrid or Andalusia — from being fully exempt due to 100% regional Wealth Tax deductions.
Double Taxation Between the IP and ITSGF: Myth or Reality?
Although both taxes target net wealth, the law provides mechanisms to avoid actual double taxation.
The ITSGF as a Complement to the Wealth Tax
The ITSGF allows taxpayers to deduct the amount already paid under the Wealth Tax (IP) in their respective region.
In practice:
- If the region applies a high Wealth Tax → the ITSGF is reduced or eliminated.
- If the region offers a 100% Wealth Tax discount → the State collects the full ITSGF amount.
Minimum Fiscal Harmonization
The structure seeks to balance territorial differences, ensuring that large fortunes contribute evenly, regardless of their region’s fiscal policy.
Practical Example
- In Madrid or Andalusia: Wealth Tax is fully discounted, so taxpayers pay the ITSGF in full to the State.
- In the Balearic Islands or Valencia: Wealth Tax applies regional rates; thus, the ITSGF only covers the difference.
Differences in Taxation by Autonomous Region
The following comparison summarizes how double taxation on wealth operates depending on the regional tax rules:
Madrid and Andalusia
- 100% Wealth Tax discount.
- Taxpayers only pay the ITSGF.
- Revenue goes to the State.
Balearic Islands and Valencia
- Apply their own rates and deductions.
- Taxpayers pay both the IP and part of the ITSGF.
- Revenue is split between the regional and national governments.
Numerical Example
For a net wealth of €5 million, with a tax-free allowance of €700,000 and a full ITSGF quota of €60,000:
- Madrid or Andalusia:
Wealth Tax fully discounted → taxpayers pay €60,000 to the State. - Balearic Islands or Valencia:
Regional Wealth Tax quota of €55,000 → taxpayers pay an additional €5,000 in ITSGF, totaling €60,000.
ITSGF and IP: Examples of Taxation Across Regions
The difference in the taxation of large fortunes lies precisely in how the Wealth Tax deduction is applied within the ITSGF.
| Autonomous Region | Wealth Tax Regulation (Base) | Wealth Tax (IP) | ITSGF Complement Payable | Total Revenue |
|---|---|---|---|---|
| Madrid | 100% Wealth Tax discount | €0 | Full ITSGF amount | Full ITSGF amount (for the State) |
| Andalusia | 100% Wealth Tax discount | €0 | Full ITSGF amount | Full ITSGF amount (for the State) |
| Balearic Islands | Applies its own rates and deductions | > €0 | ITSGF – IP | IP + ITSGF (Harmonized) |
| Valencia | Applies its own rates and deductions | > €0 | ITSGF – IP | IP + ITSGF (Harmonized) |
Conclusion: A Hidden Fiscal Harmonization
The ITSGF does not replace the Wealth Tax (IP); rather, it complements it to ensure that large fortunes contribute fairly across the country.
While Madrid and Andalusia transfer their collection to the State, regions like the Balearic Islands and Valencia maintain balance through their own Wealth Tax.
In essence, the current system aims for minimum fiscal harmonization rather than full double taxation.
Do You Have Questions About How the ITSGF Affects You in the Balearic Islands?
At Resitax, we are a tax advisory firm in Mallorca, specialized in wealth management, taxation, and fiscal optimization strategies for individuals and companies.
Our team of experts helps you analyze your situation and find the best legal strategies to protect and grow your wealth.
