A new tax benefit is available for individuals considering relocating to the Madrid region.
This law, which takes its name from French football player Kylian Mbappé, who was recently signed to play for Real Madrid, will allow foreigners arriving in the Madrid region from 2024 onwards to take a deduction on the regional portion of their personal income tax if they make certain investments. The goal is to attract high-net-worth individuals to increase the region’s gross domestic product.
The Mbappé law will allow these new residents who invest in shares, company shares, fixed income securities, or bonds to deduct up to 20% of the value thereof in the regional portion of their personal income tax . In the case of shares, the investor can´t hold more than 40% of the investment and no management and/or labour relationship may be carried out.
The new rule was approved on 20 November 2024, and will be applicable as of 1 January 2025.
To qualify for the special tax treatment, the investment can´t be in real estate. Moreover, the investment does not necessarily have to be linked to Spanish territory.
The conditions for individuals to qualify for this deduction include:
Taxpayers who avail themselves of this deduction are considered ordinary tax residents in Spain and must pay income tax on their worldwide personal income tax and assets. This is contrary to the so-called Beckham law, whereby the taxpayer becomes a tax resident in Spain but is taxed only on income from Spanish sources, except for income from employment. In this sense, because taxpayers are not taxed on their worldwide income, they cannot apply the benefits to avoid international double taxation under an income tax treaty.
For more information on this topic, please consult your regular BDO contact or the author of this article.
Ignacio Gridilla
BDO in Spain
This law, which takes its name from French football player Kylian Mbappé, who was recently signed to play for Real Madrid, will allow foreigners arriving in the Madrid region from 2024 onwards to take a deduction on the regional portion of their personal income tax if they make certain investments. The goal is to attract high-net-worth individuals to increase the region’s gross domestic product.
The Mbappé law will allow these new residents who invest in shares, company shares, fixed income securities, or bonds to deduct up to 20% of the value thereof in the regional portion of their personal income tax . In the case of shares, the investor can´t hold more than 40% of the investment and no management and/or labour relationship may be carried out.
The new rule was approved on 20 November 2024, and will be applicable as of 1 January 2025.
To qualify for the special tax treatment, the investment can´t be in real estate. Moreover, the investment does not necessarily have to be linked to Spanish territory.
The conditions for individuals to qualify for this deduction include:
- Foreign tax residency for the previous five tax periods
- Becoming an ordinary tax resident in Madrid for at least six years
- Keeping the investment for at least six years
Taxpayers who avail themselves of this deduction are considered ordinary tax residents in Spain and must pay income tax on their worldwide personal income tax and assets. This is contrary to the so-called Beckham law, whereby the taxpayer becomes a tax resident in Spain but is taxed only on income from Spanish sources, except for income from employment. In this sense, because taxpayers are not taxed on their worldwide income, they cannot apply the benefits to avoid international double taxation under an income tax treaty.
For more information on this topic, please consult your regular BDO contact or the author of this article.
Ignacio Gridilla
BDO in Spain