Spain: The Constitutional Court upholds the temporary Solidarity Tax on Large Fortunes

In brief

The Plenary of the Constitutional Court has dismissed the appeal of unconstitutionality filed by the Council of the Community of Madrid against the Temporary Solidarity Tax on Large Fortunes (TLF) established by Act 38/2022 of December 27 (Article 3). The ruling, backed by the progressive majority of judges, holds that the TLF does not imply an invasion of the state in the tax jurisdictions of the autonomous communities.

In depth


On 28 December 2022, the Spanish government approved a new tax: The Solidarity Tax on Large Fortunes (TLF). This temporary tax, regulated and managed at the state level, was designed to counteract the total or partial exemptions existing in different autonomous regions for Wealth Tax (WT) purposes, such as in Madrid or Andalusia. It is an analogous and complementary tax that is configured identically to the WT (applicable to Spanish tax residents on a worldwide assets basis and applicable to tax non-residents in Spain only on the assets or rights located or exercisable in Spain). The tax rate differs from the WT, and the TLF allows the deduction of the WT liability paid as a mechanism to avoid double taxation.

In this regard, the legislative process, its effective date of enactment, and its content have been debated on the grounds that it could contravene different constitutional precepts and, therefore, be an illegal tax.

As a result, the Council of the Community of Madrid filed an appeal of unconstitutionality, which has been dismissed by the Constitutional Court. The resolution has not been published yet. However, the Constitutional Court has released a press statement with its conclusions.

In light of this, the appeals of unconstitutionality submitted by the Autonomous Communities of Andalusia, Galicia, and Murcia will likely be dismissed, mirroring the outcome of the Community of Madrid's appeal.

Arguments for appeal

The Community of Madrid alleged the following constitutional infringements:

  1. Infringement of Article 23.2 of the Spanish Constitution (SC) for initiating the legislative process with a bill instead of a draft law and for lack of homogeneity with the original text of the amendment bill by which the TLF was introduced.
  2. Infringement of Articles 156.1 and 157.3 SC by creating a new tax to improperly harmonize the WT instead of modifying the financing system of the autonomous communities, as well as breach of the principles of tax coordination and solidarity of Article 156.1 SC.
  3. Infringement of Article 31.1 SC for breaking the principles of economic capacity and non-confiscation.
  4. Infringement of the principle of legal certainty of Article 9.3 SC for establishing a retroactive tax since the TLF was enacted on 28 December 2022 and affects FY 2022.

Constitutional Court's decision

The Constitutional Court based its decision on the following aspects:

  1. Infringement of Article 23.2 SC

The court applies the constitutional doctrine on the right of amendment, according to which Article 23.2 SC is only contravened when there is a clear and manifest lack of connection between the content of the amendment and the bill in respect of which it is proposed.

The court considers that this is not the case of the TLF since the purpose of the bill was the creation of two additional taxes (energy and banking) intended to provide public revenue and collections to address the consequences of the energy and price crisis caused by the war in Ukraine.

This reasoning leads the court to determine that the legislative procedure complies with the homogeneity requirement.

  1. Infringement of Articles 156.1 and 157.3 SC

Regarding the infringement of the financial autonomy of the Community of Madrid, the court recalls that the TLF is complementary to the WT, which is a state-owned tax allocated to the autonomous communities. As previously mentioned, the WT liability is deducted to determine the amount of the new tax (TLF), ensuring it does not affect or infringe upon the financial autonomy of the autonomous communities. In other words, the capacity to collect tax revenues of the Autonomous Communities remains the same.

In this regard, the resolution underlines that the appeal fails to identify any competence affected by the challenged tax. The court states that the actual complaint of the Community of Madrid is that its residents, whose wealth exceeds EUR 3 million (the only ones subject to the tax on large fortunes), will have to pay the new state tax, which could potentially reduce Madrid's tax attractiveness for attracting such wealth to its territory.

  1. Infringement of Article 31.1 SC

The Constitutional Court asserts that the TLF is equivalent to the WT and would only be confiscatory if its tax liability exceeds the value of the taxpayer's wealth, not the income generated by the taxed assets, which is a separate manifestation of economic capacity.

To support the view that the TLF is not confiscatory, the court quotes data extracted from Spanish tax authorities statistics, which indicates that the effective tax rate for the TLF is below 0.5% of the value of the taxed assets, thereby deeming it not disproportionate.

  1. Infringement of Article 9.3 SC

In terms of the alleged violation of the principle of legal certainty, the ruling highlights that the TLF is not applied with regard to a tax period but to specific dates (31 December 2022 and 2023). Hence, at the date of entry into force, there was no situation that had begun to produce effects, so it is not retroactive, and the principle of legal certainty was upheld.


Given that the resolution has not yet been published, and our analysis is based solely on the press release issued by the Constitutional Court, we believe it is prudent to wait for the definitive text before proceeding with specific recommendations. In this regard, it is worth noting that four of the 12 judges plan to attach a dissenting vote to the resolution, considering that the TLF should be declared unconstitutional.

Furthermore, we believe that despite the ruling not aligning with the expectations of some taxpayers, there may still be opportunities to challenge the legality of the tax, both from a domestic constitutional perspective and an EU law perspective.

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