The Wealth Tax has become a highly contentious issue within the Spanish fiscal system, especially as autonomous communities administer it, intending to levy contributions predominantly from those with higher incomes.

The ongoing legal scrutiny surrounding the tax is set against the backdrop of a pending decision from the Constitutional Court, which will determine the validity of the legislation under which the tax operates.

Legal sources indicate that thousands of appeals filed by taxpayers are currently piling up, reflecting growing uncertainty regarding the tax's future.

These appeals arise primarily from individuals who have been subjected to the Wealth Tax.

By filing these claims, taxpayers seek the possibility of recovering amounts paid in the event that the courts deem the tax itself or its prolonged implementation unconstitutional.

The Wealth Tax was first established in Spain during the 1970s but experienced significant fluctuations starting in the 2000s.

In 2008, Prime Minister José Luis Rodríguez Zapatero suspended the tax through legislative measures, although it was not formally abolished.

The aftermath of the financial crisis prompted the Socialist Party (PSOE) to reinstate the tax in 2011, reactivating it until 2013 through a royal decree-law.

In 2013, the then-government led by Mariano Rajoy sought to maintain tax revenue by fully reintroducing the Wealth Tax, only to abolish it again in 2014. However, subsequent budget laws continued to delay the formal repeal of the tax, raising legal questions regarding its validity.

Economic expert Ángel Sáez, a partner at Ros Petit, discussed the intricate legal framework related to the continued application of the tax, questioning whether budget laws can be used to create or modify taxes.

He emphasized that, per the Constitution, taxation requires either a substantive law or a royal decree-law, and budget laws do not fit this criterion.

Since January 1, 2014, when the Wealth Tax was initially repealed, no ordinary law has reinstated it.

According to Sáez, the successive budget laws and royal decree-laws have merely postponed the tax’s reintroduction rather than genuinely reinstating it.

This situation has led Sáez to assert that the tax effectively ceased to exist in 2014 when it was not followed by a substantive legal re-establishment.

The Wealth Tax is currently under review by the Constitutional Court, following challenges from both the employer's association Foment de Treball and the Popular Party, with arguments centered on the excessive use of budget laws in extending the tax's applicability.

Tax advisors have begun to recommend that their clients file appeals against any payments demanded under the Wealth Tax, according to Rafael Granados, a tax lawyer and director of the tax department at Ceca Magán. The potential invalidation of the tax by the Constitutional Court could significantly impact affected taxpayers if a refund is deemed necessary, similar to past events when the court nullified increases in the Corporate Tax.

In the event of an annulment ruling, the onus for reimbursing affected taxpayers would likely fall on the autonomous communities, which have benefitted from the tax revenues.

However, the situation could become intricate following the implementation of the Solidarity Tax on Large Fortunes in 2023.

This new tax, which is collected by the state, is intended to complement the Wealth Tax administered by autonomous regions.

Payments made under the Wealth Tax can be credited against the obligation under the Solidarity Tax.

The introduction of the Solidarity Tax aimed at prompting regions such as Madrid and Andalusia to withdraw the 100% exemptions previously granted on the Wealth Tax, and those regions have amended their stances accordingly.

Presently, Extremadura remains the only region not levying the Wealth Tax, forgoing potential revenues which are now retained by the state through the new Solidarity Tax.

This complex interplay of tax policies raises questions about accountability and liability, with discussions suggesting that autonomous communities may argue that the state bears responsibility for Wealth Tax obligations during the relevant years.