The Madrid Assembly has given final approval to the tax incentive for foreign investors, along with a series of tax deductions for housing.
According to the regional government's estimates, the eight new aids approved for housing and depopulation will result in a tax saving of over €150 million for Madrid residents. These are in addition to the 21 measures already approved by Isabel Díaz Ayuso's team, which collectively offer a total saving of approximately €31.3 billion.
Tax cuts on housing
The Madrid Assembly has approved a legislative amendment that includes tax deductions on housing, among other provisions, for those who move to towns and villages at risk of depopulation.
Under this new measure, those under 35 can deduct €1,000 for either buying or renting a home in these villages, which have fewer than 2,500 inhabitants. Additionally, they will be able to deduct 10% of the purchase price, with an annual limit of €1,546 for 10 fiscal years.
Furthermore, they can benefit from an additional 100% bonus on the Property Transfer Tax (ITP) for the acquisition of second-hand homes and on the Documented Legal Acts (AJD) for new homes. According to the official statement, this measure will result in a total saving of €7 million for Madrid residents.
A €1,000 deduction has also been approved for renting empty homes, which can be applied by small property owners who sign contracts with a minimum duration of three years. According to estimates from the Ministry of Economy, Finance and Employment of the CAM, nearly 20,000 beneficiaries will be able to save a total of €20 million.
Another measure aims to ease the impact of rising variable loan instalments due to higher interest rates, with the Euribor rate from December 2022 as the reference. The measure applies to habitual residences, provided the property cost does not exceed €390,000 and the per capita family income is below €30,930. The Madrid Executive estimates that this will benefit 450,000 mortgage holders and result in savings of €90 million.
In addition, the scope of the deduction for renting a habitual residence is being extended, raising the maximum age for eligibility from 35 to 40 years. "With this measure, around 45,000 taxpayers will benefit, joining the 65,000 who currently benefit from it, resulting in a tax relief of €50 million per year," the statement outlines.
According to the Government of the Community of Madrid, "housing incentives package will benefit more than half a million taxpayers in the upcoming Income Tax campaign".
Tax deductions for foreigners with the Mbappé Law
The first of these, better known as the "Mbappé Law", will allow foreign investors who transfer their tax residence to the Community of Madrid after having been abroad for at least five years to benefit from a 20% deduction on the regional personal income tax rate. This measure will apply to changes of residence from this year onwards.
Additionally, investors will be required to maintain both the investment and their tax residence in the autonomous region for a minimum of six years. The bonus excludes real estate investments, as well as those made in entities based in tax havens or by individuals who hold executive roles or work in the companies in which they invest. Examples of eligible investments include contributions to bonds, treasury bills, shares in both listed and unlisted companies and investments in limited companies, among others.
Thus, the parliamentary process of this law, which had been delayed by the previous legislature, has now concluded. At that time, the PP governed in a minority and relied on Vox as its key parliamentary partner, who, as in this plenary session, opposed the law, preventing its passage.
During the parliamentary debate, Vox MP Ana Cuartero criticised the PP for attempting to approve this regulation, which includes "tax deductions for foreigners," given the ongoing situation in Valencia following the flash floods.
For his part, Socialist Fernando Fernández described the law as "the biggest fiscal nonsense in the history of the Community of Madrid," arguing that it favours "wealthy foreign millionaires" by offering tax exemptions that are not even available to Spaniards. In his view, it "deserves the largest of amendments in its entirety, with a permanent return to the Government," as he believes it is a "fiscal insult to the intelligence of the people of Madrid."
He also argued that the law is "clearly contrary to the constitutional principles of equality and economic capacity," claiming that the regional government "has exceeded its powers" and that the "bonus is being regulated illegally."
Next, Más Madrid deputy Eduardo Gutiérrez argued that this regulation reflects the government's insistence on turning the region into "the den of tax evaders, the most unsupportive wealthy citizens in the world." He also stated that it does not "guarantee that investments will remain in Madrid."
Finally, PP representative Álvaro Ballarín emphasised that the law is "for residents" and insisted that it would lead to "greater revenue collection." "It will attract new taxpayers and it is a law that will improve and increase our tax collection. It will attract investments, boost GDP and raise our per capita income," he asserted.
Madrid approves a tax deduction to attract foreign investment
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, attract talent and facilitate the return of emigrants. Specifically, the bill contemplates a new deduction of 20% in the regional personal income tax quota for taxpayers who invest in public debt or shares, or make contributions to companies.
Valencia offers tax deductions for flood victims
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 Spanish cities with the highest and lowest unemployment rates
Sant Cugat del Vallès (Barcelona) and Pozuelo de Alarcón (Madrid) have the lowest unemployment rates in Spain, with an estimated average of 5.3% for 2023. They are followed by Las Rozas (Madrid) at 5.7%, and Getxo (Vizcaya) and Majadahonda (Madrid), both at 6%, according to the Urban Indicators 2024 report published by the Spanish Institute of Statistics (INE).
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