Explore the new 20% deduction in Madrid's regional IRPF (Personal Income Tax) for new tax residents who make financial and business investments in the region. Learn about its requirements and advantages.
Popularly known as the "Mbappé Law", it is actually a new tax deduction approved by the Community of Madrid (included in Law 4/2023, of December 22). Its main objective is to incentivize the arrival of new investors and talent to the Madrid region, reinforcing it as a center for attracting capital and economic activity.
This incentive allows new tax residents in the Community of Madrid (those who have not been tax residents in Spain in the previous 5 years) to deduct 20% of the amount of investments made in the regional share of IRPF. This deduction can fully offset said regional share.
To benefit from this investment deduction for new residents in Madrid, the following fundamental requirements must be met:
It is essential to establish effective tax residence in the Community of Madrid.
The taxpayer must not have been a tax resident in Spain for the five years prior to changing residence to Madrid.
Make investments in financial assets, companies, or certain real estate assets (see eligible types below) in the region.
It is necessary to maintain the investment made and tax residence in Madrid for a minimum period of six years.
Important: The investment must be made in the same fiscal year in which residence is acquired in Madrid or in the following one.
The 20% deduction in Madrid's regional IRPF applies to investments made in the following types of assets:
Not all investments are valid. For example, investments in entities domiciled in tax havens do not qualify for deduction. If investing in unlisted companies, the investor cannot hold more than 40% of the share capital, exercise executive or management functions, or maintain an employment relationship with said entity. It is crucial to analyze each case.
Although both regulations seek to attract talent and capital to Spain (and specifically to Madrid in the case of the "Mbappé Law"), they are distinct tax regimes with different objectives and mechanisms. In principle, they could be compatible if the requirements of both are met.
A new resident in Madrid could, if meeting the requirements of both regimes, opt for the Beckham Law to optimize the taxation of their employment income and, additionally, apply the "Mbappé Law" deduction to their regional IRPF share for investments made in the Community of Madrid.
A new tax resident in Madrid, under the Beckham Law, with a salary exceeding €600,000. Makes an investment of €100,000 in assets eligible for the "Mbappé Law".
Note: This is a highly simplified example. The actual calculation and interaction between both regimes depend on the complete income structure, specific regional liability, and compliance with all requirements. Individual analysis is required.
The 'Mbappé Law' is a tax incentive from the Community of Madrid that seeks to attract new investors and high-income residents through a 20% deduction in the regional IRPF share for investments made in the region. Its objective is to strengthen Madrid as a center for attracting investments, companies, and talent.
New tax residents in the Community of Madrid who have not been tax residents in Spain in the last five years and who make qualifying investments can benefit. It is designed to attract investors in financial assets and companies, high-income residents, and high-level economic talents. Unlike the current Beckham Law, the Mbappé Law can still be used by athletes.
It is necessary to be a new resident in Madrid and not have been a tax resident in Spain for the previous five years. An investment in financial assets or companies must be made in the region (with specific conditions for unlisted companies). The investment must be made in the same year or the year following the move of residence to Madrid, maintained for a minimum of six years, and not used for the purchase of the taxpayer's primary residence.
The Mbappé Law is regional (Madrid only) and focuses on attracting investors through a 20% deduction in the regional IRPF bracket. The Beckham Law is national and is primarily aimed at highly qualified workers and professionals, applying a reduced flat rate on employment income. Under the Mbappé Law, universal income is taxed, while under the Beckham Law (for workers), only income generated in Spain is taxed.
The tax benefit (the 20% deduction for investment) can be applied in the fiscal year in which the investment is made and for the following five fiscal years, provided that the investment and residency requirements are maintained.
If you are planning to move your residence to Madrid and make investments, this new "Mbappé Law" tax incentive can be very beneficial. At GESTISYD, we analyze your particular case, advise you on how to apply this deduction, its compatibility with other regimes like the Beckham Law, and assist you with all necessary procedures.