The Temporary Solidarity Tax on Large Fortunes (ISGF) is a direct tax, personal in nature, and complementary to the Wealth Tax (IP). It taxes the net wealth of individuals exceeding € 3,000,000, making it a relevant element for planning and compliance for high-net-worth individuals with a Spanish connection.

As it’s also the case with the Wealth Tax (IP), the ISGF is subject to the so-called “combined limit”, a rule establishing that the gross tax liability of this tax, together with the liabilities under Personal Income Tax (IRPF) and Wealth Tax (IP), may not exceed 60 % of the sum of the taxable bases of the IRPF, reducing taxation down to this limit, although such reduction may not exceed 80 % of the ISGF liability.

The ISGF rules provide that the “combined limit” applies only to persons taxed under personal obligation, i.e., Spanish tax residents, which means that the limit does not apply to non-resident taxpayers taxed under real obligation.

However, the Central Economic-Administrative Court (TEAC) has recently issued two decisions in which it considers that the “combined limit” must apply both to residents and non-residents, applying the doctrine of the Supreme Court, which considered the application of the limit under the Wealth Tax (IP) to be discriminatory.

For this reason, we recommend that non-resident ISGF taxpayers consider seeking the rectification of their tax returns filed to date in order to recover the amounts overpaid, plus the corresponding late-payment interest.