The average wealth of major declarants in Madrid reaches 11.7 million euros, almost four times the 2.8 million of Catalonia, according to the 2024 Wealth Tax data published by the Tax Agency.
The 2024 Wealth Tax reveals a historic difference between Madrid and Catalonia. The average wealth of major declarants in Madrid stands at 11.7 million euros, compared to 2.8 million for Catalonia, according to data from the Tax Agency analysed by ecosistemastartup.com. In total terms, Madrid declares 297.901 billion euros and Catalonia 268.330 billion.
The gap is not new, but it has accelerated. Since 2019, average wealth in Madrid has grown by 17.8%, while Catalonia's has barely increased by 7.7%. In 2019, the total for Catalonia (211.126 billion) exceeded that of Madrid (193.948 billion). Five years later, the positions have reversed.
The explanation lies in the number of declarants and regional taxation. Catalonia has 94.875 declarants, compared to 25.524 in Madrid, but its minimum exempt threshold is 500.000 euros, while Madrid's rises to two million. This means that Catalonia includes medium wealth that does not reach a million, while Madrid only collects data from millionaires. Hence the enormous difference in the average: fewer declarants, but with much greater fortunes.
Of the total declared by major wealth holders, 68.7% corresponds to shares and participations, 17.6% to real estate, 6.5% to bank deposits, and 7.2% to jewellery and other assets. The bulk consists of financial assets, primarily equities, so the picture also reflects how each territory's stock market is performing.
The key to the turnaround lies in the 100% exemption on the Wealth Tax applied by the Community of Madrid to wealth between one and three million euros, combined with the reintroduction of the tax in 2023 following the creation of the Temporary Tax on Large Fortunes (ISGF) by the State.
Madrid went from collecting zero euros in 2022 to receiving 613.7 million in 2023 and 642.77 million in 2024. Why is it collecting now when it wasn’t before? Because the Madrid law of 2022 established that paying the regional Wealth Tax exempts one from paying the state tax, meaning the money stays in the region instead of going to the State's coffers.
Of the 25,500 Madrid declarants in 2024, only about 11,400 ended up paying: more than 14,000 benefited from a 100% exemption on the fee, which resulted in a loss of 732 million euros in revenue just in Madrid. In contrast, in Catalonia, regional exemptions cost barely half a million euros in revenue.
In November 2024, the Madrid Assembly approved a 20% deduction on the regional income tax for foreign investors who relocate their tax residence to the region. The regulation, known as the Mbappé Law, requires that the investor has not been a tax resident in Spain for the previous five years and must maintain the investment for at least six years. The deduction applies to investments in shares or participations in companies based in Madrid, bonds, and investment funds, but excludes real estate investment. If the investor does not generate enough income tax in their first year, they can carry forward the benefit for up to five subsequent years.
It is important to distinguish this Madrid Mbappé Law from the state Beckham Law: the Beckham Law, in effect since 2003, sets a flat rate of 24% on employment income for six years; the Mbappé Law does not change rates but refunds up to 20% of the invested amount via a deduction in the regional income tax. They are different mechanisms for partially different audiences.
The ISGF, designed to neutralise regional exemptions, did not perform as expected. An internal report from the General Directorate of Taxes accessed by ABC acknowledges that a drafting error allowed taxpayers from Madrid, Andalusia, and Galicia to deduct from their state tax bill the same amount that had already been exempted in their community, which reduced the expected burden by up to 80%. Of the 2.951 billion euros of theoretical gross quota, only a much smaller fraction was ultimately collected.
You may also like
