BackThe Renta 2024 in Madrid starts with innovative measures and a new personal income tax deflation, while progress is being made in the processing of a personal income tax deduction to attract foreign investment.
Although we have already known about the personal income tax deflation in Madrid for months, progress is now being made on the second measure, with the aim of attracting foreign capital.
In this way, the Community of Madrid kicks off the 2024 Income Tax campaign with the implementation of the second consecutive deflation and the introduction of new tax deductions.
These measures are expected to generate significant tax savings for taxpayers with tax residence in the Region of Madrid, estimated at 286 million euros in personal income tax returns.
In addition to the extension of existing deductions, taxpayers in Madrid will benefit for the first time from the advantages provided for in the Maternity and Paternity Protection Strategy, as well as the Community of Madrid’s Promotion of Childbirth and Work-Life Balance. In total, the benefits for taxpayers are estimated to reach 133 million euros.
In addition, deflation will be implemented for the second time, with an estimated saving of 153 million euros. This measure aims to mitigate the fiscal effects of wage increases due to inflation for the 3.5 million taxpayers in the region.
Among the new deductions for this year’s Income Tax campaign is the rebate for new large families, who will enjoy a 50% reduction in their regional income tax liability for three years, reaching 100% in the case of special categories.
In order to facilitate access to the main residence, two new deductions have been introduced. On the one hand, those linked to births or adoptions, which will have a discount of 10% of the purchase price, prorated over ten years, with an annual limit of 1,546 euros. On the other hand, those under 30 years of age will be able to deduct 25% of the interest paid on mortgage loans, with an annual limit of 1,031 euros, until they reach 30 years of age. In addition, an incentive of 515 euros is established for the care of ascendants over 65 years of age or with disabilities.
In relation to the renting of housing, a 10% discount on the associated expenses is implemented. Another new feature this year is the possibility of deducting 100% of the interest on loans for university studies.
At the same time, the Community of Madrid is starting the process to introduce a new deduction in personal income tax to attract foreign investment. Following the approval of the report on the preliminary draft of the law that will regulate this new tax measure, the legislative process has begun and is expected to be completed in the coming weeks.
This new deduction will allow new taxpayers who settle in Madrid after having resided outside Spain for at least five years to apply a 20% discount on their regional personal income tax liability for investments in financial assets for a maximum of six years.
This measure has become known as “the Beckham Law of the Community of Madrid”, given its similarity to the special regime for posted workers in the requirement of five years’ residence outside Spanish territory.
This measure is expected to encourage international investment and attract new business projects to the region, which is already a leader in attracting foreign investment in Spain, with two out of every three euros invested from abroad going to projects in Madrid in the last decade.
The Community of Madrid, with this second tax measure, is expected to have a positive impact on the region, which was already proving to be an attractive tax haven as one of the most attractive cities for people taking advantage of the Beckham Law.
This regime involves the application of a flat personal income tax rate of 24% up to € 600,000, thereafter applying a flat rate of 47% instead of the progressive rates applicable under the general regime.
At B LAW & TAX we are experts in international tax advice. If you have any questions regarding the application of the Beckham Law, or with regard to the preparation and filing of your income tax return during the 2023 tax year, please do not hesitate to contact us.
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