The Valencian Council has approved a decree law establishing extraordinary tax measures to provide immediate support to families and companies affected by the recent floods for those taxes over which the Valencian Community has regulatory powers. Specifically, these are deductions in Personal Income Tax (IRPF) and bonuses in the inheritance and gift tax and the property transfer tax, among other measures.
The approved measures are designed to "facilitate compliance with tax obligations, extend tax benefits to mitigate personal and material damages resulting from the storm and promote the recovery of economic activity in the affected areas," according to Vice President Susana Camarero and the spokesperson and head of the Treasury, Ruth Merino.
Specifically, the Generalitat has announced an extension of the deadline for submitting and paying self-assessments for the Inheritance and Donations Tax, the Tax on Property Transfers and Documented Legal Acts, the Gambling Tax and the Environmental Impact Activities Tax until 31 January 2025. This applies to taxes with a submission and payment deadline between 28 October and 31 December 2024.
The measure applies to individuals or entities with a tax domicile in the affected municipalities, as well as to owners of real estate located in these areas or to those who can demonstrate that the storm has severely hindered their ability to fulfil their tax obligations, the Generalitat stated in a press release.
Measures in the regional section of the Personal Income Tax (IRPF)
Regarding tax benefits, the decree law includes two measures in the regional section of the Personal Income Tax (IRPF), which will remain in effect for the tax periods ending in 2024 and 2025.
Firstly, a 100% deduction is granted for expenses incurred in addressing storm damage to the primary residence, with a limit of €2,000. On this occasion, the income thresholds for regional deductions are raised to €45,000 of taxable income for individual taxation and €60,000 for joint taxation.
Secondly, a 45% deduction is set for amounts invested in the subscription and payment of shares or corporate interests as a result of agreements to establish or increase the capital of public limited companies, limited liability companies, employee-owned companies or contributions made by partners to cooperative companies. In this case, the amount can reach €9,900 per taxpayer.
This measure aims to "contribute to the obtaining of own resources by entities that carry out economic activities and have their headquarters within the territorial area affected by the floods," the regional administration stresses.
50% bonus on inheritance and gift tax
Regarding the Inheritance and Gift Tax, the Consell has announced a 50% reduction for "mortis causa" acquisitions made by second- and third-degree collateral relatives, as well as ascendants and descendants of individuals who died as a result of the floods.
Additionally, 100% reductions to the tax base are introduced for individuals or entities that receive cash or other assets and rights as donations to alleviate material damages caused by the storm, with a distinct regime established depending on the intended use of the donation.
The application of the benefit, the Generalitat clarifies, is not dependent on the degree of kinship or familiarity of the donor. However, it will be subject to the condition that the donation is used to alleviate material damages resulting from the floods within 12 months of the acquisition.
Specifically, these reductions apply to "inter vivos" donations for the acquisition of assets not involved in economic activities, as well as for the acquisition of assets affected by the business activities of a sole trader or professional enterprise.
For donations aimed at acquiring assets not used in economic activities, reductions will apply to donations made between 29 October 2024 and 31 December 2025, both dates inclusive. These donations must be made to individuals who use the assets to repair or replace their property that was directly damaged by the storm.
The reductions will also apply to donations made between 29 October 2024 and 31 December 2026, where the purpose is the acquisition of a new primary residence if the previous one cannot be used due to being totally or partially destroyed, the property having been declared a ruin or demolition having been required.
100% of the property transfer tax if the property serves to replace the home destroyed by the floods
On the other hand, with the Tax on Property Transfers (ITP) and Documented Legal Acts, benefits are provided that will exempt acquisitions intended for the replacement of certain property elements from taxation.
In this regard, a 100% reduction is established on the rate applicable to transactions involving the acquisition of properties intended to replace those destroyed or severely damaged by the storm. This also applies to acts of declaration of new construction and/or horizontal division relating to the replacement properties, where necessary to obtain aid or regularise their registration.
The Consell also points out that the "significant" number of accidents involving motor vehicles "makes it unavoidable," to restore mobility for those affected, to grant a 100% reduction on the ITP and AJD rate for the acquisition of vehicles to replace those destroyed by the floods. This reduction applies to acquisitions made between 29 October 2024 and 31 December 2025, both dates inclusive.
Other measures
Finally, the approved decree law includes other measures, such as the exemption from the sanitation fee for water consumption in the affected areas between 29 October 2024 and 31 March 2025. This exemption applies to all water usage within the territorial scope of the affected municipalities.
Furthermore, the collection process for outstanding payments of this sanitation fee is also suspended for individuals and legal entities with a residence or business address in the affected municipalities, from the entry into force of the decree law until 28 February 2025.
Regarding the taxes on gambling, the decree introduces, among other measures, a 100% reduction on the full rate of the tax applicable to the operation of machines and gambling when the operation has been affected by the storm, as well as on the portion of the tax corresponding to the days of the tax period during which the operating authorisation "was suspended or permanently cancelled."