New deductions in the IRPF quota to incentivise the energy rehabilitation of housing

On 6 October, Royal Decree-Law 19/2021 was published in the Official State Gazette (BOE), on urgent measures to boost building refurbishment activity in the context of the Recovery, Transformation and Resilience Plan

The regulation, which came into force on the same day of its publication, aims to renovate real estate in Spain to achieve the goal of climate neutrality, as well as to boost employment and activity in the short term with the intention of post-pandemic recovery and growth. With this objective, the new regulation introduces, among other novelties, measures in the fiscal area applicable to Personal Income Tax (IRPF), all of them related to the execution of works to improve the energy efficiency of dwellings.

In this regard, three temporary deductions have been approved, applicable to the total state income tax liability, which will be applied to the amounts invested in refurbishment works that contribute to the objective of achieving certain improvements in the energy efficiency of the habitual or rented dwelling for use as a home. For the application of the deductions detailed below, it is required that the payment of the amounts that generate the right to these deductions is made directly to the persons or entities that carry out the work and that this payment is made by credit or debit card, bank transfer, nominative cheque or deposit in a credit institution account. By exclusion, works paid for in cash are not eligible for deduction.

The new deductions applicable are as follows: 1.- Deduction of 20% of the amounts paid, from 6 October 2021 and until 31 December 2022, for the carrying out of works that contribute to the reduction of the heating and cooling demand of the main residence, in rented housing or in the expectation of renting, provided that it is rented before 31 December 2023. The maximum base for the deduction will be 5,000 euros per year when the following requirements are met:

• The works contribute to: a reduction of at least 7 % in heating and cooling demand.
• Formal requirement: This reduction must be proven by the issuing of an energy performance certificate by a competent technician before 1 January 2023.
• Deduction exercise: in the tax period in which the certificate is issued.

2.-Deduction of 40% of the amounts paid, between 6 October 2021 and 31 December 2022, for carrying out works that contribute to the improvement in the consumption of non-renewable primary energy of the main residence, in rented housing or in the expectation of renting, provided that it is rented before 31 December 2023. The maximum base for the deduction will be 7,500 euros per year, provided that the following requirements are met:

• The works contribute to:
  • the reduction of at least 30% of non-renewable primary energy consumption,
  • or improve the energy rating of the dwelling to obtain an energy class “A” or “B”,
• Formal requirement: these requirements must be proven by the issuing of an energy performance certificate by a technician before 1 January 2023.
• Deduction year: the tax period in which the certificate in question is issued.

3.-Deduction of 60% of the amounts paid, from 6 October 2021 to 31 December 2023, for the carrying out of works, by homeowners in buildings of predominantly residential use, to improve the energy efficiency of the building. The maximum base of the deduction will be 5,000 euros per year, and the maximum accumulated base of the deduction may not exceed a total of 15,000 euros. If the maximum base is exceeded in one year, the excess may be applied in the following four years. For this purpose, the following requirements must be met:

• The works contribute to:
  • the reduction of at least 30% of non-renewable primary energy consumption,
  • or improve the energy rating of the dwelling to obtain an energy class “A” or “B”,
• Formal requirement: before the end of the tax period in which the deduction is to be applied, the energy performance certificate in question must have been issued
• Deduction year: to be applied in the years 2021, 2022 and 2023, in relation to the amounts paid in each of these years.

In the three cases, the works carried out in the part of the home that is affected by an economic activity, if this is the case, do not generate the right to deduction; furthermore, in the first two cases, the part corresponding to parking spaces, storage rooms and gardens, among others, will not be deductible either.

On the other hand, in relation to the third deduction, parking spaces and storage rooms that have been acquired together with the home will be assimilated to the home. As a control measure, it is envisaged that, by regulation, the Autonomous Communities will have to report on the energy efficiency certificates registered and the final aid resolutions that have been granted for works to improve the energy efficiency of dwellings, together with the list of cadastral reference numbers to which they refer. In addition, tax exemptions are regulated for certain subsidies for the improvement of buildings.

Finally, the same regulation also approves the creation of a line of ICO guarantees for the partial coverage, by the State, of the financing of the described refurbishment works that contribute to the improvement of energy efficiency, from which homeowners and homeowners’ associations that are going to carry out the aforementioned works may benefit.