Spain: New tax incentive for foreign investors (Madrid)
Draft law for new regional individual (personal) income tax credit for foreign taxpayers
Draft law for new regional individual (personal) income tax credit for foreign taxpayers
A draft law for the creation of a new regional individual (personal) income tax credit for foreign taxpayers investing in qualifying properties and securities in Madrid.
The draft legislation is to be processed as a matter of urgency so that the law can be passed in 2023. The draft law may be subject to amendments during the legislative procedure in the Madrid Assembly and approval of the final law.
Who is eligible for the tax credit?
Natural persons not resident in Spain who transfer their residence to the Region of Madrid and become individual income tax taxpayers, provided they have not been tax resident in Spain during the five years preceding the year in which the change of residence takes place.
The tax credit will take effect for tax periods commencing as of 1 January 2023.
Tax credit rate and eligible investments
The tax credit will amount to 20% of the acquisition value, including related expenses and taxes and excluding interest, of any of the following assets:
- Real property located in the Region of Madrid
- Securities representing the assignment to third parties of equity issued by any kind of entity, traded on organised markets or otherwise
- Securities representing holdings in the equity of any kind of entity, traded on organised markets or otherwise
Deadline for investment
Investments in real estate located in the Region of Madrid, in shares in Spanish companies or securities representing the assignment to third parties of own capital issued by Spanish entities may be made in the year:
- Preceding the year in which tax residence in Spain is acquired in accordance with the individual income tax legislation
- In which tax residence in Spain is acquired
- Following the year in which tax residence in Spain is acquired
Investments in any other qualifying assets may be made in the year in which tax residence is acquired or in the following year.
Minimum investment period
The taxpayer must maintain the qualifying investment for a minimum period of six years.
However, this minimum investment period requirement will not be deemed breached when an investment is disposed of and the profits are reinvested within one month.
When is the tax credit to be taken?
Generally speaking, the tax credit may be taken in the year in which the investment is made or within the five years immediately following it.
In the specific case of investments in real estate, securities representing the assignment to third parties of equity issued by Spanish entities, or securities representing a holding in the equity of Spanish entities made in the year preceding the year in which tax residence in Spain is acquired, the tax credit may be taken in the year in which tax residence is acquired or within the five years immediately following it.
Entitlement to the tax credit be lost
Entitlement to the tax credit will be forfeited in the event of loss of tax residence in Madrid during the six-year minimum investment period, and in the event of breach of the obligation to maintain the investment made (i.e., if the assets are transferred before the above period elapses).
Read a March 2023 report [PDF 173 KB] prepared by the KPMG member firm in Spain
For further information, contact a KPMG professional in Spain:
Jose Luis Lopez Hermida | jllopezhermida@kpmg.es
Xavier Aixela | xaixela@kpmg.es
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