The main tax innovations introduced are the following:

PERSONAL INCOME TAX (IRPF)

1. With effect from January 1, 2023 , the fiftieth Additional Provision of Law 35/2006, of November 28, on personal income tax, is modified.

   With this modification, the scope of application of deductions for works to improve the energy efficiency of homes is extended for another year.

   However, despite this extension, in the deduction for energy rehabilitation works (60%) the maximum accumulated base remains at €15,000.

   • Deduction for works to reduce heating and cooling demand: 20%

     Housing in which the works can be carried out:

     The taxpayer's habitual residence or any other home owned by him or her that was rented for use as a home or in expectation of rental, provided that, in the latter case, home is rented before December 31, 2024.

     Works that are not eligible:

     Those carried out from October 6, 2021 until December 31, 2023.

     Deduction base:

     The amounts paid from October 6, 2021 until December 31, 2023 for the works.

     The maximum annual base will be 5,000 euros per year.

     Tax period during which this applies:

     The one in which the energy performance certificate was issued after the work was carried out. These certificates must be issued before January 1, 2024.

   • Deduction for works to improve the consumption of non-renewable primary energy: 40%

     Housing in which the works can be carried out:

     The taxpayer's habitual residence or any other home owned by him or her that was rented for use as a home or in expectation of rental, provided that, in the latter case, the home is rented before December 31, 2024.

     Works that are not eligible:

     Those carried out from October 6, 2021 until December 31, 2023.

     Deduction base:

     The amounts paid from October 6, 2021 until December 31, 2023 for the works.

     The maximum annual base will be 7,500 euros per year.

     Tax period during which this applies:

     The one in which the energy performance certificate was issued after the work was carried out. These certificates must be issued before January 1, 2024.

   • Deduction for energy rehabilitation works: 60%

     Works that are not eligible:

     Those carried out from October 6, 2021 until December 31, 2024.

     Deduction base:

     • When the certificate has been issued during the tax period: the amounts paid from October 6, 2021 until the end of the tax period.

     • When the certificate was issued during a previous tax period: the quantities satisfied in the year.

     The maximum annual base will be 5,000 euros per year.

     The amounts paid that are not deducted because they exceed the maximum annual deduction base may be deducted, with the same limit, in the following four years, without in any case the accumulated base of the deduction exceeding 15,000 euros.

     Tax periods during which this applies:

     In principle it can be applied in 2021, 2022, 2023 and 2024 . However, in order to be able to apply the deduction, the energy efficiency certificate must have been issued after the works have been carried out. These certificates must be issued before January 1, 2025.

2. With effect from January 1, 2022, section 3 of article 87 of Personal Income Tax Law 35/2006, of November 28, is amended, which is worded as follows:

   "3. Entities under the income attribution regime will not be subject to Corporate Tax, with the exception of the provisions of section 12 of article 15 bis of the Corporate Tax Law.

   The purpose of this modification is to avoid an inverted hybrid asymmetry by converting certain entities under the regime of attribution of Spanish income for certain income into corporate tax payers in Spanish territory.

   For more information see Corporate Tax.

CORPORATION TAX

1. The following modification is introduced to Law 27/2014 on Corporate Tax:

   • Freedom of amortization in investments that use energy from renewable sources

     Article 22 of Royal Decree Law 18/2022 introduces a new seventeenth Additional Provision in Law 27/2014, of November 27, on Corporate Tax, by which taxpayers may freely amortize investments made in installations intended for self-consumption of electrical energy, as well as those installations for thermal use for own consumption, as long as they use energy from renewable sources and replace facilities that use energy from non-renewable fossil sources and that are made available to the taxpayer as of the entry into force of Royal Decree-Law 18/2022 (October 20) and come into operation in 2023 .

     They will be freely amortized in the tax periods that begin or end in said year, provided that, during the 24 months following the start date of the tax period in which the acquired elements come into operation, the total average workforce of the entity is maintained with respect to the average workforce of the previous twelve months.

     However, buildings will not be able to benefit from the freedom of depreciation regulated in this provision.

     The maximum amount of the investment that may benefit from the freedom of amortization regime will be 500,000 euros.

     The entities to which the tax incentives for small companies provided for in Chapter XI of Title VII of Law 27/2014 of November 27, on Corporation Tax, may choose between applying the of amortization provided for in article 102 of this Law or apply the regime of freedom of amortization regulated in this provision.

2. With effect for the tax periods that begin on or after January 1, 2022 , the following modifications are introduced to Law 27/2014 of the Corporate tax:

   • Organisations in the income allocation scheme that are subject to Corporation Tax

     The second Final Provision of Royal Decree Law 18/2022, modifies section 2 of article 6 of Law 27/2014, of November 27, on Corporate Tax, in such a way that Entities under the income attribution regime will not be taxed by Corporate Tax, with the exception of those to which section 12 of article 15 bis of Law 27/2014, of 27 of November, of the Corporate Tax.

     In this way, through the modification of Law 27/2014, on Corporate Tax, the mandate of article 9 bis of Directive (EU) 2016/1164 is incorporated into the articles of said Law with the purpose that certain entities under the allocation of income located in Spanish territory does not give rise to a hybrid asymmetry, to this end these entities become taxpayers of Corporate Tax when the conditions are met and with respect to certain income that could generate a hybrid asymmetry with third countries. Taking into account the above, the entity under the regime of attribution of income that gives rise to the aforementioned hybrid asymmetry is obliged to comply with the accounting and registration obligations that correspond to the method of determining its income, including those that are taxed according to this Tax.

   • Incorporation into the Corporate Tax Law of a new case of Hybrid Asymmetry

     The second Final Provision, of Royal Decree Law 18/2022, adds a new section 12 in article 15 bis of Law 27/2014, on Corporate Tax, passing the current sections 12 and 13 to be numbered as sections 13 and 14, respectively. With this new section, the mandate of article 9 bis of Directive (EU) 2016/1164, in the wording given by Directive (EU) 2017/952, with regard to hybrid asymmetries with third parties, is transposed into the Spanish legal system. countries, in the case of inverted hybrid asymmetries, forcing Member States to treat fiscally transparent entities as residents that are considered by the legislation of the countries of residence of their majority shareholders as entities subject to personal income tax for avoid a situation of hybrid asymmetry in which certain income is not taxed in any country or territory, that is, it is not taxed either at the headquarters of the entities under the income allocation regime or at the headquarters of its participants or the entity paying said income. .

     Thus, an entity under an income attribution regime in which one or more entities, linked to each other, participate directly or indirectly on any day of the year, in the capital, in the own funds, in the results or in the voting rights in a percentage equal to or greater than 50 percent and are residents in countries or territories that qualify the entity under the attribution regime as a taxpayer for a personal income tax, will pay corporate tax, as a taxpayer, for certain positive income that corresponds to all participants residing in countries or territories that consider the entity in attribution of income as a taxpayer for personal income taxation .

     The tax period will coincide with the calendar year in which such income is obtained. The rest of the income obtained by the entity in the attribution of income will be attributed to the partners, heirs, community members or participants and will be taxed in accordance with the provisions of section 2 of title X of Law 35/2006, of November 28. , Personal Income Tax and partial modification of the laws on Corporate Taxes, Non-Resident Income Taxes and Wealth Taxes.