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Practical manual for Income Tax 2024. Part 1

Deductions from the full fee

Deductions for incentives and stimuli to business investment in economic activities in direct estimation

Economic and fiscal regime of the Canary Islands 

Canary Islands Investment Reserve

With effect from 1 January 2024, the Canary Islands Investment Reserve must be funded from profits obtained within the period of validity of Commission Regulation ( EU) 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty, or any replacement regulation.

Special tax regime of the Balearic Islands

The aforementioned special tax regime for the Balearic Islands continues to apply from 2023 to 2028, inclusive.

With effect for tax periods beginning between 1 January 2023 and 31 December 2028, a special tax regime was introduced for the Balearic Islands by Law 31/2022 of 23 December on the General State Budget for 2023. This entitles taxpayers of Personal Income Tax (IRPF) ## who carry out economic activities under direct estimation to a deduction from the full tax rate for the net operating income allocated to the investment reserve and to a bonus corresponding to the income derived from the sale of tangible assets produced in the Balearic Islands by themselves, derived from agricultural, livestock, industrial and fishing activities.

In order to allow the full implementation of these tax incentives in the most efficient and simple way possible, as well as to provide legal certainty to legal operators, and to specify some legal concepts, the Regulation for the development of the Special Tax Regime of the Balearic Islands is approved through Royal Decree 710/2024, of July 23 ( BOE of July 24) with effects on Personal Income Tax for the years 2023 to 2028.

Deductions for donations and other contributions

Donations, donations and contributions for priority patronage activities

Deductible concepts and basis of deduction

Royal Decree-Law 6/2023, of December 19 (Official State Gazette of December 20), expressly includes, among the types of donations that entitle the taxpayer to the deduction, the transfer of use of movable or immovable property made without consideration, also specifying the valuation of said transfer of use of movable or immovable property.

Deduction percentages

In order to increase tax incentives for patronage, the amount of the first section of the deduction base on which the 80% percentage is applied has been increased from 150 to 250 euros. Furthermore, the current generally applicable deduction percentage is increased from 35 percent to 40 percent.

However, the most important new feature introduced concerns the reduction from 4 to 3 years in the number of fiscal years in which donations to the same entity must be made for amounts equal to or greater than those of the previous fiscal year, in order for the 5-point increase in the deduction percentage to be applied, rising from 40 to 45 percent.

Deduction for habitual residence and effective on the island of La Palma during the 2024 financial year

Royal Decree-Law 4/2024, of June 26, which extends certain measures to address the economic and social consequences arising from the conflicts in Ukraine and the Middle East and adopts urgent measures in tax, energy and social matters, modifies the Fifty-seventh Additional Provision of the Personal Income Tax Law to extend to 2024 the temporary scope of application of the deduction provided for in article 68.4.1 of the Personal Income Tax Law (deduction for income obtained in Ceuta and Melilla) applicable to taxpayers with habitual and effective residence in the island of La Palma.

Deduction for works to improve the energy efficiency of homes

With effect from 1 January 2024, the fiftieth Additional Provision of the Income Tax Law is amended to extend the temporary scope of application of deductions in Income for energy efficiency improvement works for one more year (until December 2024 in the case of primary residences and until 31 December 2025 in the case of residential buildings).

Deduction for the acquisition of plug-in electric vehicles and fuel cells and charging points

The two new deductions established by the Fifty-eighth Additional Provision in the Personal Income Tax Law remain applicable until December 31, 2024, which are:

  • Deduction for the purchase of new plug-in electric and fuel cell vehicles.

  • Deduction for the installation of battery charging points for said electric vehicles.