Tax measures to promote energy efficiency in housing are approved.

The measures consist of personal income tax deductions of 20%, 40% or 60% for works in homes and residential buildings that improve energy efficiency and the exclusion of certain subsidies and aids for refurbishment from personal income tax.

On October 6, 2021, Royal Decree-Law 19/2021, of October 5, 2021, on urgent measures to promote the rehabilitation of buildings in the context of the Recovery, Transformation and Resilience Plan, was published.

The following is a summary of the main tax measures, all of them within the scope of Personal Income Tax (IRPF):

Deductions for works to improve the energy efficiency of dwellings 2.

With effect from October 6, 2021, three new temporary deductions are introduced in the state IRPF gross income tax liability, which will be calculated on the amounts invested in refurbishment works that contribute to achieve certain improvements in the energy efficiency of the habitual or rented dwelling for its use as a dwelling. Specifically:

a. Deduction of 20% of the amounts paid for works carried out between October 6, 2021 and December 31, 2022, for the reduction of the heating and cooling demand of the habitual residence or any other dwelling owned by the taxpayer that is rented or in expectation of being rented for use as a dwelling, provided that, in the latter case, the dwelling is rented before December 31, 2023. The maximum deduction base will be 5,000 euros per year. The works must contribute to a reduction of at least 7% in the heating and cooling demand, which will be accredited through the energy efficiency certificate of the dwelling.

b. Deduction of 40% of the amounts paid for works carried out in the same period of time as the previous deduction, for the improvement in the consumption of non-renewable primary energy of the habitual residence or any other property owned by the taxpayer that is rented or in expectation of being rented for use as a dwelling, provided that, in the latter case, the dwelling is rented before December 31, 2023. The maximum deduction base will be 7,500 euros per year. The works must contribute to a reduction of at least 30% of the non-renewable primary energy consumption, which will be accredited by means of the energy efficiency certificate of the dwelling; or improve the energy rating of the dwelling to obtain an energy class “A” or “B”, on the same rating scale.

c. Deduction of 60% of the amounts paid for works carried out between October 6, 2021 and December 31, 2023 by owners of dwellings located in buildings of predominantly residential use, which allow an improvement in the energy efficiency of the building as a whole, provided that a reduction in the consumption of non-renewable primary energy of at least 30% is accredited through an energy efficiency certificate; or an improvement in the energy rating of the building to obtain an energy class “A” or “B”, on the same rating scale. In this case, the parking spaces and storage rooms that have been acquired with these will be assimilated to housing. The works carried out in the part of the housing that is affected to an economic activity will not give right to this deduction.

The maximum deduction base will be 5,000 euros per year. The amounts paid and not deducted because they exceed the maximum annual deduction base may be deducted, with the same limit, in the following four fiscal years, but in no case may the accumulated deduction base exceed 15,000 euros.

In relation to the deductions foreseen in letters a) and b) above, the following is foreseen:

a. That they will not be able to be practiced when the work is carried out in parts of the dwellings that are affected to an economic activity, parking spaces, storage rooms, gardens, parks, swimming pools and sport facilities and other analogous elements.

b. That the same work cannot give right to both deductions.

c. That they will not be applicable when the accredited improvement and the amounts paid correspond to actions carried out in the building as a whole and the application of the deduction indicated in letter c) above.

The following is established for the three deductions:

a. That the deduction base will be constituted by the amounts paid by credit or debit card, bank transfer, nominative check or deposit in accounts in credit institutions to the persons or entities that carry out the works or that issue the corresponding certificates. The amounts paid by means of delivery of legal tender will not give right to deduction.

b. That the amounts subsidized or to be subsidized through a public aid program must be deducted from the deduction base.

2. Aid for residential rehabilitation and housing

On the other hand, it is established that the aids granted under the programs established in: (i) Royal Decree 691/2021, of August 3; (ii) Royal Decree 737/2020, of August 4 and (iii) Royal Decree 853/2021, of October 5.