The Government of the Community of Madrid has given the green light to what is known as the 'Mbappé Law', a regulatory change that aims to attract foreign investments.
At the meeting held on June 19, the regional Executive approved the bill with the new deduction in the regional personal income tax quota to attract investments from taxpayers from abroad. "The objective is to generate employment and wealth in the region thanks to this Personal Income Tax incentive," commented the Community of Madrid.
Specifically, the new rebate is 20% of the contribution made in investments such as public debt (bonds, debentures and Treasury bills), shares in listed and unlisted companies or contributions in limited companies, among others.
The regulation text, drafted by the Regional Ministry of Economy, Finance and Employment, will apply to all operations carried out as of 1 January this year. It has been transferred to the regional Assembly so that it can begin its parliamentary processing before its vote and entry into force in the coming months.
To qualify for this deduction, several conditions must be met. For example, both the investment and the tax residence must be kept in the region for at least six years. Moreover, the taxpayer must file a tax return in the region and cannot have been resident in Spain five years before the change of location.
Furthermore, foreign taxpayers may not invest in entities registered in tax havens, nor may they exercise executive or management functions or maintain an employment relationship with the entity where they make their contributions.
Besides attracting investment, the government led by Isabel Díaz Ayuso also aims to attract talent, as well as professionals to cover the needs in certain sectors and facilitate the return of those who emigrated in the past.
€11 billion saved in personal income tax
The regional government claims that it has been lowering personal income tax for Madrid taxpayers for two decades. According to the official statement, "Since 2004 the Community of Madrid has carried out numerous reductions in personal income tax that have allowed taxpayers to save almost €11 billion up to last year".
It clarifies that in addition to the four reductions in the regional tax rate, deductions have been added for educational expenses, birth or adoption, caring for the elderly, renting a primary residence or caring for children under the age of three, among others. In addition, two deflations have been applied in the last two years to mitigate the effects on salaries as a result of high inflation.
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