Spain: New tax incentive for foreign individuals investing in certain securities (Madrid)

The Madrid Regional Assembly approved a new regional individual (personal) income tax credit for investments in certain securities by foreigners acquiring tax residence in Madrid that would apply to transactions executed beginning January 1, 2024.

The draft law may be subject to amendments during the legislative procedure in the Madrid Assembly.
 

Who is eligible for the tax credit?

Natural persons not resident in Spain who relocate to the Region of Madrid and become individual income tax taxpayers, provided they have not been a tax resident in Spain during the five years preceding the year in which the change of residence takes place, would be eligible for the credit.
 

Tax credit rate and eligible investments

The tax credit would amount to 20% of the acquisition value, including related expenses and taxes and excluding interest, of any of the following assets:

• Securities representing the assignment to third parties of equity traded on organized markets or otherwise
• Securities representing holdings in the equity of Spanish or foreign entities, traded on organized markets or otherwise
   

Deadline for investment

Investments consisting of securities representing the assignment to third parties of equity issued by Spanish entities, or securities representing a holding in the equity of Spanish entities may be made in the year in which tax residence in Madrid is required, or in the year preceding, or following, such year.

Investments in any other eligible investments may be made in the year in which tax residence in Madrid 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 would 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. 
 

Lost entitlement to the tax credit

Entitlement to the tax credit would 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 July 2024 report prepared by the KPMG member firm in Spain