The Spanish government includes foreign banks with branches in Spain in the banking tax

MADRIDA flurry of partial amendments entered the Congress of Deputies this Thursday, specifically around the proposed law that collects the new temporary taxes on the big banks and energy companies and that PSOE and Unides Podemos registered in the summer. One of the main developments is that the Spanish government foresees that foreign banks with branches in Spain will also be affected, according to one of the amendments presented jointly by the two parties in the Spanish executive. This was one of the recommendations that the European Central Bank (ECB) added to the report presented last week in which it critically assessed the new levy.

Specifically, the amendment states that the tax on large banks will not only affect Spanish credit institutions in which the gross sum of interest and commissions charged to customers is greater than 800 million euros, but also “branches established in Spanish territory by foreign credit institutions […] regardless of the sum of their income from interest or commissions”, according to the text to which the ARA has had access. The banking tax will have a tax rate of 4.8% and will apply to commissions and net interest charged to clients, specifically, the net brokerage margin of both concepts is taxed.

This tax, as well as the energy tax, will need enough votes from the Congress of Deputies to go ahead. The government’s regular partners have also submitted amendments that they will now have to negotiate. ERC and EH Bildu propose that the taxes be structural. Now, while the latter are more demanding with the tax rates in banking, the former open the door to consider taxing extraordinary profits, in line with what the European Commission has proposed and how they ask for energy, and not income totals An option that the Popular Party also raises in one of its amendments. In addition, PNB and EH Bildu also want all taxes, including that of large fortunes, to be negotiated in the joint commission and adapted to the provincial regulations.

Tax on the great fortunes

The Spanish government has taken advantage of the presentation of amendments to introduce the tax on large fortunes or “solidarity” announced as part of the State’s general budget for next year. It will be a temporary tax that will be in force for two years, like banking and energy taxes, and will be collected in the financial years of 2023 and 2024. It follows the scheme of the wealth tax and will tax the net worth of natural persons over three million euros. The aim of the new tax is to prevent large fortunes from communities such as Madrid, where the tax is subsidized at 100%, to avoid paying taxes on their assets as is done in most autonomous communities. The government estimates that it will affect around 23,000 taxpayers. However, some regions such as Madrid have already warned that they will “armour” themselves against what they consider an “invasion of competences”.