Spain´s Capital´s Madrid Assembly has passed the tax reform known as the ‘Mbappé Law’. This reform is designed to make Madrid a magnet for high-net-worth international investors through major tax incentives. The proposal received full support from the Popular Party but faced unanimous opposition from other parliamentary groups, including Vox, which only backed measures related to rural depopulation.
KEY ASPECTS OF THE ‘MBAPPÉ LAW’
- Objective:
To attract large foreign fortunes by offering substantial tax deductions.
- Tax Deduction:
New residents can deduct 20% of their investments in financial products (e.g., shares, bonds, investment funds) in the regional Personal Income Tax (IRPF).
- Effective Date:
The law applies retroactively from January 1, 2024, though it will officially come into force in the coming months.
REQUIREMENTS FOR ELIGIBILITY
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Previous Residence:
Must not have resided in Spain during the previous five years.
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Investment Restrictions:
Investments cannot be in companies based in tax havens or in the real estate sector.
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Family Stake Limit:
Cannot invest in companies where the investor or family members hold more than 40% of the stake.
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Minimum Residency Period:
Must maintain residency in Madrid for a minimum of six years.
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Non-Compliance:
Failure to meet these requirements, especially the residency period, results in losing the tax benefits.
CRITICISM AND SUPPORT
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Supporters:
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The regional government views the law as a means to attract talent and investment to Madrid.
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Critics:
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Opposition parties, including the PSOE and Más Madrid, argue that this is a “tax gift to millionaires”.
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They estimate a potential revenue loss of €60 million, affecting public services.
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Vox remains skeptical about the law’s true impact but supported other rural-focused tax incentives.
ADDITIONAL TAX INCENTIVES
The reform package also includes measures aimed at combating rural depopulation:
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For Young Residents in Small Towns:
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Bonus of up to €1,000 for renting or buying homes in towns with fewer than 2,500 inhabitants.
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10% deduction on real estate purchases in these areas.
