- The Constitutional Court declared unconstitutional and void article 88 b) of Catalan Law 5/2020.
- That rule raised the personal allowance in income tax for taxpayers with a taxable base of up to €12,450.
- In the Court’s view, Catalonia exceeded the limits set by the State law on ceded taxes.
On 8 November 2021 the Constitutional Court’s ruling, handed down on 28 October, was made public. It upholds the appeal of unconstitutionality filed by the central Government in March 2021 against a provision of Catalan Law 5/2020 on fiscal, financial, administrative and public-sector measures. The Court declares unconstitutional and void article 88 b), which raised the personal and family allowance in income tax (IRPF) for low-income taxpayers.
The measure benefited those whose taxable base, adding the general and savings bases, was up to €12,450, to whom a personal allowance higher than the State’s applied. The Court holds that the autonomous communities cannot make the amount of the allowance depend on the taxpayer’s income level, because that goes beyond what the State law governing the partial cession of the tax allows. The Court had already examined the limits of that capacity before.
The personal and family allowance
The personal and family allowance is the part of income that is not subject to tax in IRPF, because it is considered necessary to cover the basic needs of the person and their family. It is made up of the taxpayer’s own allowance, which as a general rule is €5,550 a year and rises with age, and of other allowances for descendants, ascendants or disability.
IRPF is a State tax partially ceded to the autonomous communities, which may modify certain elements within the limits set by the cession law. The discussion is not whether the Catalan measure was reasonable from a social point of view, but whether the Generalitat had the power to shape it in those terms, and the Court finds it did not. Its answer rests on the wording of the cession law, not on an assessment of whether it is desirable to protect lower incomes.
The Court’s reasoning
According to the ruling, the State allowance depends only on personal and family circumstances, such as age. Making it depend on income level exceeds the framework and limits introduced by the State in the cession law, and therefore encroaches on the State’s competence over general public finances under the Constitution. For the general framework, the Court relies on its earlier case law on the division of fiscal powers.
The case is a reminder that the tax autonomy of the regions has boundaries, and that the Government’s challenges to regional deductions and measures in IRPF continue. For the taxpayer, those disputes matter because a measure applied in a return can later be annulled, with whatever consequences that entails. That uncertainty affects those who prepare their returns with regional deductions and the advisers who must guide them.
What to review
It remains to be seen how the ruling will apply to years already declared and how the Generalitat will respond, as it may look for another way to maintain the measure’s social aim. Taxpayers with taxable bases below that threshold who applied the increased allowance should ask their adviser how it affects them and whether any correction is advisable. If in doubt, correcting in good time usually costs less than waiting for a formal request.
It is also a good moment to review other regional deductions applied in recent returns and make sure all requirements are met and the documentation is kept. This note is for information only and does not assess the situation of any particular taxpayer.
A deduction is worth only as much as its legal certainty, and it should be checked before it is applied.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
