The Supreme Court has upheld a ruling by the High Court of Justice of the Balearics (TSJIB) establishing that discriminating against non-residents in Spain for tax purposes, by preventing them from applying the combined 60% limit between income tax and wealth tax, violates the free movement of capital and European regulations.
In a ruling dated 3 November, to which EFE has had access, the contentious chamber rejects the appeal filed by the State Attorney’s Office against a June 2023 ruling by the TSJIB. The Supreme Court clarified whether habitual residence, whether in Spain or abroad, justifies different treatment in the wealth tax limit, in the case of a Spanish taxpayer resident in Belgium who had to pay tax on a number of properties he owned in Spain.
The man appealed against the tax assessment proposed by the Treasury, and the TSJ of the Balearic Islands ruled in his favour on the grounds that it was a discriminatory measure that hindered the free movement of capital, as it only took into account the place of residence to oblige one person to bear a much higher tax burden than another who, in the same situation as him, resides in a different country of the European Union.
The judges referred to their own case law and that of the Court of Justice of the European Union (CJEU), which, among other things, states that measures prohibited as ‘restrictions on the movement of capital include those which may deter non-residents from investing in a Member State or residents of that Member State from investing in other States’.
In the case of both national residents and EU residents, ‘the same assets are taxed and they are in the same situation, which is none other than the accumulation of income and wealth,’ the ruling states.
For this reason, the Supreme Court finds it discriminatory that non-residents in Spain are not entitled to apply the combined limit of 60% of personal income tax (IRPF) and wealth tax.
Habitual residence, whether in Spain or abroad, does not justify the different treatment given to residents and non-residents, so that the latter are not subject to the full tax limit provided for in Article 31 of the Wealth Tax Law. This difference in treatment is ‘discriminatory and unjustified,’ the ruling adds.