BackThe autonomous communities have the power to manage the autonomous part of the Personal Income Tax, a tax partially ceded to the autonomous communities. Such is the case of the Community of Madrid.
Currently, is working on a modification of the regional Personal Income Tax regulations, which includes deductions of up to 20% of the value of the investments made by the taxpayer. This measure, known as the ‘Mbappé Law’, would benefit large fortunes, as could be the case of the future Real Madrid player, if rumors are confirmed.
Currently, the ‘Mbappé Law’ is the colloquial name of a draft bill presented by the Community of Madrid. This preliminary draft proposes deductions in the autonomic integral quota of up to 20% of the value of investments made by foreigners moving to the region.
According to the stipulated draft bill, we can highlight that “in a context of strong international competitiveness, it is important to maintain a leading position in attracting these monetary flows and to generate incentives to continue channeling investments that have a positive impact on the Community of Madrid”.
For this reason, deductions of “20% of the acquisition value, including the expenses and taxes inherent to the acquisition, excluding interest, which would have been paid by the acquirer” are contemplated. This covers the following areas:
- Securities representing the transfer to third parties of own capital, whether or not traded on organized markets.
- Securities representing the participation in the equity of any type of entity, whether or not traded in organized markets.
The requirements established to benefit from the ‘Mbappé Law’ are as follows:
- The entity in which the investment is made may not be incorporated or domiciled in any tax haven.
- The direct or indirect participation of the taxpayer may not exceed 40% of the capital or of his voting rights, considering also the participation of his spouse or of any person linked by kinship, in a straight or collateral line, by consanguinity or affinity, up to the second degree inclusive.
- No executive or management functions may be exercised, nor may an employment relationship be maintained with the entity.
- The investment must be made in an entity in the Community of Madrid and must be maintained for at least six years.
- The taxpayer cannot have had residence in Spain in the five years prior to the change of residence to the Community of Madrid.
The draft bill has no limitations on investments, which favors individuals who make significant investments. In these cases, the new taxpayer in Madrid could fully benefit from the deduction in the autonomous community tax liability.
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