The wealth tax has a legal safeguard that allows Spain’s great fortunes to significantly reduce the bill they would otherwise have to pay. The mechanism is technically known as the integral quota limit, although in tax circles it is referred to as the income-wealth limit or simply a tax shield. Whichever name is chosen, the scheme links the amount to be paid with the income declared in the IRPF, with the idea that the bill for the tax on wealth does not skyrocket if the taxpayer reports relatively low income. In 2024, the last year for which there is data at the Tax Agency, the reduction applied by this limit reached 3.119 billion euros, almost 89% more than that recorded for the same concept in 2019, the year before the pandemic.
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This amount, which in practice acts as a saving for the wealthiest taxpayers in Spain, has been growing year after year and already far exceeds the amount collected from the wealth tax, which in 2024 brought in just over 2.1 billion euros to the regional treasuries. The sharp increase is explained because declared wealth has soared, but also, tax advisors consulted point out, due to the planning of some ultra-rich individuals who maneuver to take advantage of the legal loophole and reduce their quota. The agency’s figures do not allow knowing the number of taxpayers in this situation, but suggest that these profiles are among the country’s largest fortunes.
The shield rule is relatively simple. It allows the wealth tax quota of the richest taxpayers, combined with that of the IRPF, not to exceed in any case 60% of the sum of the taxable bases of the income tax. When that percentage is exceeded, the wealth tax quota is reduced to bring it within the limit. Although with a cap, since the reduction can never exceed 80%. That is, at least 20% of the initially corresponding wealth tax bill must always be paid.
Raquel Jurado, a technician from the study service of the Register of Tax Advisor Economists (REAF), presents an example that shows how the mechanism works. Two taxpayers have an initial wealth tax quota of 100,000 euros, but their incomes are different. The first has a taxable base of 50,000 euros in the IRPF and pays 15,000 euros for this tax. The sum of both quotas would amount to 115,000 euros, while the joint limit is set at 30,000 euros — 60% of the IRPF base. The excess is therefore 85,000 euros. However, even though there is that discount, the rule establishes that at least 20% of the wealth tax quota must be paid. In this case, instead of the 100,000 euros initially corresponding, he would end up paying 20,000 euros for wealth tax, in addition to the 15,000 from the IRPF.
The second taxpayer has exactly the same wealth tax quota, but a taxable base of 200,000 euros in the IRPF and a quota of 60,000 euros. In this case, the joint limit rises to 120,000 euros. Since the sum of both taxes would be 160,000 euros, the excess is reduced to 40,000 euros. That is the amount that can be discounted from wealth tax, so he ends up paying 60,000 euros for this tax, in addition to the 60,000 from the IRPF. “A taxpayer with the same wealth can pay either 20,000 or 60,000 euros depending on what his IRPF taxable base was,” Jurado points out, a difference explained by the different income level and the limit established by the regulation.
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The way income is obtained also influences the saving. Jurado explains that if the taxpayer receives dividends, these increase his taxable base and reduce the margin to reduce the wealth tax. On the other hand, if his investments appreciate without selling them or generating income, that gain does not increase the computable income in the IRPF. The result is that two fortunes that grow by the same amount can benefit differently from the shield.
Therefore, as far as possible, some ultra-rich plan how and when they receive their income. Another tax advisor consulted, dedicated to advising family wealth, explains that the strategy may involve postponing dividend distributions that increase the IRPF base or maintaining investments whose profitability does not emerge until their sale, as happens with some funds.
The safeguard aims to prevent the sum of income and wealth taxation from becoming disproportionate. That philosophy may be valid for some cases, but not for all. This is what Sumar perceives, which this week has presented a bill to tax the largest fortunes — those exceeding 50 million euros — and precisely to prevent part of the potential revenue from escaping through the legal frameworks of the tax.
Another point that the government’s minority partner wants to address is the exemption for family businesses, the other big hole in the tax. This scheme allows not counting the value of some businesses as long as certain activity and participation percentage requirements are met. Again, the party believes the philosophy is justified in some cases, but not in all. According to data from the Tax Agency, of all the wealth declared in 2024 — about 987 billion euros — by around 227,000 wealthy people in Spain, 460 billion corresponded to exempt shares and participations.
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