B Law & Tax
27 December 2023

Tax Advisor: Legislative Titles in the Community of Madrid: Tax Reforms and Deductions for the Fiscal Year 2023

The Official Gazette of the Community of Madrid on December 21, 2023, has published Law 12/2023, dated December 15, which introduces temporary adjustments to the bonus for the Wealth Tax in the Community of Madrid during the validity of the Temporary Solidarity Tax on Large Fortunes (ITSGF).

According to the amendment, from January 1, 2023, and while the ITSGF is in force:

  1. The general bonus for the Wealth Tax established in Madrid regulations (100% of the resulting quota after applying state deductions and bonuses) will not be valid.
  2. Instead, an autonomous bonus can be applied, calculated by the difference, if any, between:

   – The full quota of the Wealth Tax derived from the application of the joint limit established in Article 31 of Law 19/1991, of June 6 (income-wealth limit).

   – The full quota corresponding to the ITSGF, after applying the joint limit established in Article 3.Twelve of Law 38/2022, of December 27 (income-wealth-ITSFG limit).

 

In general, the application of this new bonus implies that ITSGF taxpayers in 2023 effectively pay the Wealth Tax, resulting in the quota to be paid in the ITSGF being equal to “0”.

Simultaneously, Law 13/2023, of December 15, has been published, amending the Consolidated Text of the legal provisions of the Community of Madrid regarding taxes ceded by the State, approved by Legislative Decree 1/2010, of October 21.

This law, effective for the fiscal years beginning in 2023, includes:

  1. A decrease of 3.1% in the scale applicable to the general taxable base of the Personal Income Tax (IRPF) for tax residents in the Community of Madrid.
  2. Increases in the minimum taxpayer, as well as in the minimums for descendants and ascendants.

The legislation introduces increases in the amounts and limits of tax deductions for various categories, such as the birth or adoption of children, the family foster care of minors, the unpaid foster care of those over seventy-five and/or with disabilities, the care of ascendants and children under three years of age, the rental of the habitual residence, educational expenses, the acquisition of the habitual residence due to the birth or adoption of children, obtaining the status of a large family (either general or special category), and investments in the acquisition of shares and social participations of new or recently created entities, as well as investments in entities listed on the Alternative Stock Market. These changes apply from the fiscal years beginning in 2023.

 

Tax scale

LIQUIDABLE BASE

UP TO EUROS

FULL COPY

EUROS

REMAINING LIQUIDABLE BASE

UP TO EUROS

APPLICABLE RATE

PERCENTAGE

0 0 13.362,22 8,50%
13.362,22 1.135,79 5.642,41 10,70%
19.004,63 1.739,53 16.421,05 12,80%
34.425,68 3.481,42 21.894,72 17,40%
57.320,40 7.651,10 en adelante 20,50%

 

Minimums

 

– Taxpayer Minimum

The taxpayer minimum is set at 5,956.65 euros annually in general. For taxpayers over 65 years of age, this minimum increases by 1,234.26 euros annually. For those exceeding 75 years, an additional increase of 1,502.58 euros annually is added.

– Minimum per Dependent

The amount of the minimum per dependent is raised by 2,575.85 euros annually for the first dependent eligible for this benefit and by 2,897.83 euros annually for the second. In the case of dependents under three years old, an additional increase of 3,005.16 euros annually is added to the corresponding amount of the minimum per dependent.

– Minimum per Ascendant

It increases by 1,234.26 euros annually for the minimum per ascendant. If the ascendant is over 75 years old, the aforementioned minimum is increased by 1,502.58 euros annually.

– Minimum per Dependent with Disability

In the case of dependents with a disability, an increase of 3,219.81 euros annually is applied. For those with a disability equal to or greater than 65%, the increase is 9,659.44 euros annually. These same amounts are valid for similar cases.

 

Deductions

 

– Deduction for Birth or Adoption of Children and International Adoption

Taxpayers can deduct 721.70 euros for each child born or adopted in the tax period of birth or adoption and the following two tax periods.

– Deduction for Family Foster Care of Minors

  1. a) 618.60 euros for the first minor in a family foster care arrangement.

  2. b) 773.25 euros for the second minor in a family foster care arrangement.

  3. c) 927.90 euros for the third minor in a family foster care arrangement or subsequent.

– Deduction for Unpaid Foster Care of Individuals Over 65 and/or with Disabilities

Taxpayers can deduct 1,546.50 euros for each person over 65 or with a disability equal to or greater than 33% who lives with the taxpayer for more than 183 days a year in a foster care arrangement without compensation.

– Deduction for Care of Ascendants

Taxpayers can apply a deduction of 515.50 euros for each ascendant over 65 or with a disability.

– Deduction for Rental of Primary Residence

The 30% deduction is maintained, but the maximum deduction is increased by 1,237.20 euros.

– Deduction for Expenses Derived from Housing Rentals

The deduction limit is increased by 154.65 euros annually.

– Deduction for Educational Expenses

The deduction cannot exceed 412.40 euros per child, but if there is a right to deduction for school expenses, the limit is raised to 927.90 euros per child.

– Deduction for Care of Children Under Three Years, Dependent Elderly, and Persons with Disabilities

New deduction limit of 463.95 euros annually. For large families, the limit is 618.60 euros annually.

– Deduction for Payment of Interest on Loans for the Acquisition of Housing by Young People Under Thirty Years

New maximum deduction limit of 1,031 euros annually.

– Deduction for Acquisition of Primary Residence Due to Birth or Adoption of Children

New annual deduction limit of 1,546.50 euros.

– Deduction for Obtaining the Status of General or Special Large Family

For general large families, you can deduct 50% of the regional full tax with specific limits. For special large families, the deduction is 100%.

– Deduction for Families with Two or More Descendants and Reduced Incomes

The sum of taxable bases must not exceed 24,744 euros.

– Deduction for Investment in the Acquisition of Shares and Social Participation in New or Recently Created Entities

The deduction limit is 9,279 euros annually with a maximum limit of 12,372.00 euros for companies created or participated in by universities or research centers.

– Deduction for the Promotion of Self-Employment for Young People Under 35 Years

A deduction of 1,031 euros can be applied to the regional full tax.

– Deduction for Investments Made in Listed Entities on the Alternative Stock Market

New maximum deduction of 10,310 euros.

– Limits and Formal Requirements Applicable to Certain Deductions

The sum of the general and savings taxable bases must not exceed 26,414.22 euros for individual taxation or 37,322.20 euros for joint taxation for certain deductions. Only taxpayers with a taxable income not exceeding 30,930 euros for individual taxation or 37,322.20 euros for joint taxation are entitled to the deduction for birth or adoption of a child.

However, despite the general limits established, deductions for birth or adoption of children and for the rental of the primary residence cannot be applied if the sum of the taxable bases of all members of the taxpayer’s family unit exceeds 61,860 euros.

Only taxpayers whose taxable income, including the sum of the general and savings taxable bases, along with those of the other members of their family unit, does not exceed the amount resulting from multiplying 30,930 by the total number of members in that family unit can benefit from deductions for educational expenses, care of children under three years, dependent elderly and disabled persons, acquisition of the primary residence due to birth or adoption of children, and obtaining the status of a general or special large family.

 

 

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