Reinstatement of the deduction for investment in a primary residence and extension of the reduced VAT rate for new home purchases

20 January 2012

1. The reinstatement of the deduction for investment in a primary residence for all personal income taxpayers, regardless of annual income amount, retroactive to January 1, 2011, and under the same conditions that existed prior to December 31, 2010. Thus, taxpayers with incomes above the 24,000 euros per year mark set by the previous administration, which went into effect on January 1, 2011, are no longer excluded.
Furthermore, the maximum base amount for the deduction was raised from 9,015 to 9,040 euros per year for home purchases, construction, add-ons or renovations, and from 12,020 to 12,080 euros per year for works and installations to adapt a residence for disabled individuals.
Likewise, as of February 2012, the amount of 33,007.20 euros per year was once again set as the maximum income which entitles workers to a deduction for investment in a primary residence and to request that their employer apply a 2% reduction to the split payments due. The rules in effect in 2011 were maintained in January 2012.

2. The application of the reduced VAT rate of 4% on the handover of buildings to be used for housing, including the parking spaces, has been extended to December 31, 2012 in accordance with the requirements and conditions already established in Royal Decree-Law 9/2011 of August 19th on anti-deficit measures.
In addition to the foregoing, relevant measures pertaining to corporate tax have also been included. On the one hand, the reduced tax rate of 20% for maintaining or creating employment in small companies (on a taxable base between 0 and 300,000) has been extended.

On the other hand, as of January 1, 2012 and until December 31, 2013, the percentage of withholdings or account deposits for incomes subject to corporate tax was increased from 19 to 21%. An agreement was likewise reached on maintaining the increase in split corporate tax payments on account for large companies under the terms established in Royal Decree-Law 9/2011 of August 19th.

For further information, please contact María Blanco: mblanco@mmmm.es