What does Royal Decree Law 18/2022 of October 18 consist of and what novelties does it bring with it to promote renewable energies?

Spain brings fiscal novelties for 2023. The Royal Decree Law 18/2022, which approves measures to protect energy consumers, reduce the demand for natural gas and promote the use of renewable energies, was published. If you are interested in knowing what are all the novelties that this new decree brings, stay with us until the end of this new article and know the details of the new taxation to promote renewable energies, let’s get to it!

What are the objectives to be achieved with this new decree?

The new Royal Decree Law 18/2022, October 18, aims to promote more sustainable methods to reduce energy gas consumption and protect people working in the agricultural sector who were affected by the drought.

Among the other objectives of this new decree are the following:

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What are the new tax measures that relate to renewable energies?

This new reform contemplated generating tax deductions and benefits for individuals and companies that apply to Personal Income Tax (IRPF) and Corporate Income Tax (IS).

In the case of Personal Income Tax, two types of deductions were created for people who carry out works on their homes or any other property from which they may benefit. 

For example, the heating and cooling deduction or the energy consumption deduction. What is important about these deductions are the benefits they give to homeowners and businesses.

In the case of corporate income tax, a new incentive of freedom of depreciation was established. This applies to all companies that invest in installations whose destination is the self-consumption of renewable energies. This will allow these installations to be depreciated freely.

Changes implemented in Personal Income Tax with Royal Decree Law 18/2022

One of the changes is the deduction of heating and cooling, which is 20% of the amounts satisfied by the work. As a consequence, the demand is reduced by at least 7%. In addition, it is necessary to take into account that the maximum annual deduction base is 5,000 euros.

On the other hand, there is the deduction for energy consumption, which was reduced by 40% on the amounts paid for the work. This reduced by 30% the consumption of non-renewable primary energy such as coal, natural gas, oil, among others. In this case, the maximum annual deduction base is 7,500 euros.

Another important point, in this case of deduction for energy consumption, is the issue of residential buildings. There, the possibilities of deduction for works scale to 60% and the maximum annual base is 5000 euros per owner.

In addition, it is important to highlight the extension of the time in which they can be carried out in order to enjoy such deductions. In the case of housing, they can be carried out until December 31, 2023 and, for residential buildings, until December 31, 2024.

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How did Royal Decree-Law 18/2022 change the corporate income tax system?

As we told you, in the reform of the Corporate Income Tax, a new incentive of freedom of amortization was introduced. This is intended for companies that invest in facilities for self-consumption of electricity. As well as those destined for thermal use for own consumption, as long as they come from renewable sources.

The important thing is that companies do not use energy that comes from non-renewable fossil sources and seek alternatives to replace them. In addition, they must be available to the taxpayer from the moment Royal Decree Law 18/2022 comes into force on October 20 and is in operation this 2023.

In addition, the free depreciation will be in the tax periods that begin or end in this year. However, provided that during the 24 months following the date of commencement of the tax period in which the items obtained are put into operation. The total average headcount of the entity will then be maintained in relation to the average of the previous months.

A point to be clarified is that buildings will not be able to enjoy the freedom of amortization regulated in this tax measure. In addition, the maximum investment account that will be able to benefit from this regime will be 500,000 euros. Not to mention that the entities to which this measure applies will be able to decide whether to use it or not.

What is this decree expected to achieve?

Royal Decree Law 18/22 is expected to promote the use of renewable energies and minimize the use of non-renewable fossil fuels. It is a transition that began 4 years ago and that not only promotes energy change, but also protects the interests of all citizens. 

Emphasizing that these are fiscal measures that promote an increase in the salaries of public employees and the reduction of working hours. The aim is to improve their workplaces and improve their lifestyles.

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If you want to know how the application of the Royal Decree Law 18/2022 evolves and how it can influence you, I invite you to contact our professionals of TAS Consultancy through tasconsultoria@tas-sl.es. They will clarify all the doubts you have. Do not waste time and ask for your free advice. So you can start the year at full speed.