Law 4/2024 of the Community of Madrid provides a 20% deduction on qualifying financial investments to individuals who become tax residents in Madrid after at least five consecutive years of non-residence through Article 17 bis of the regional Personal Income Tax (IRPF) framework. The regime has come to be known as Mbappé’s Law, named after Real Madrid star Kylian Mbappé.
Madrid designed the measure as part of a strategy to attract non-resident taxpayers, mobilize investment capital, reduce regional tax pressure, and reinforce the region’s fiscal competitiveness.
The reform exists because the Spanish State delegates regulatory powers over the regional portion of IRPF to the Autonomous Communities. Madrid remains the only region to exercise this prerogative with a focus on international mobility.
How the Law Works
The legislation offers a 20% deduction, calculated on the amount invested in eligible financial instruments. Taxpayers apply it in the year of investment plus the following five years, but only against the regional portion of IRPF from both the general tax base and the savings tax base.
Spain’s IRPF consists of a state scale and a regional scale. The deduction offsets only the latter.
A six-year holding requirement applies, with disinvestment permitted if 100% of proceeds are reinvested within one month into eligible assets. Pre-residency investments qualify only for investments in Spanish entities and must be maintained until the taxpayer becomes tax resident.
Full Spanish tax residence under Article 9 IRPF is required, together with assignment to the Community of Madrid under the IRPF territorial rules.
Eligible Investments
The deduction applies exclusively to financial investments: debt instruments, equity in companies, and units or shares in investment funds. Real estate, tax-haven entities, and companies in which the taxpayer holds more than 40% face express exclusion.
Importantly, the law does not require the investment to be made in Spain. Both Spanish and foreign financial assets qualify.
This design generates criticism, as the benefit may be claimed even where capital is invested entirely abroad.
Why This Is a Madrid-Only Measure
The State delegates regulatory authority over the regional IRPF portion to all Autonomous Communities. Madrid is the first to exercise this power strategically.
Taxpayers cannot apply for both Beckham’s law and the deduction. Beckham’s law places the taxpayer under a special IRPF status that excludes all regional deductions.
Spain’s Beckham Law is a special tax regime for foreigners who move to Spain for work. Instead of being taxed like regular residents, they can opt to be taxed as non-residents.
Who Benefits
This deduction is particularly relevant for individuals who cannot access the Beckham regime or for whom it provides limited benefit. Non-lucrative residents, retirees, and professional athletes (expressly excluded from Beckham’s law).
Does This Measure Compare With Beckham’s Regime?
The two incentives are structurally different.
Beckham’s law creates a six-year special tax status that applies a 24% flat rate on employment income up to €600,000 (47% on the excess), taxes Spanish-source non-employment income under Non-Resident Income Tax (IRNR) rules, and excludes all foreign-source non-employment income from Spanish taxation. It has no minimum stay requirement.
Madrid’s deduction is an investment-based credit that applies only against the regional IRPF layer, carries forward for five years, and requires maintaining Madrid tax residence for six years under the ordinary IRPF rules (worldwide income, worldwide assets).
The relative benefit depends on the taxpayer’s profile.
Beckham’s law is generally more advantageous when the taxpayer earns substantial employment income, when foreign-source income is high and excluded under Beckham’s regime, or when the individual does not expect to remain in Spain for six years.
Madrid’s deduction may outperform Beckham’s law when the taxpayer has little or no Spanish salary, when the taxpayer is ineligible for Beckham’s reime, when the taxpayer commits to remain tax resident in Madrid for the six-year holding period, or when the qualifying investment is large enough that the 20% credit exceeds the total tax savings Beckham’s regime would provide over six years.
Law 4/2024 makes Madrid the first Spanish region to use its regulatory autonomy over IRPF to target internationally mobile residents and capital. The measure is not an investment-in-Spain initiative but a strategic tax lever to reinforce the region’s competitive position.
Beckham’s and Madrid’s regime’s are not substitutes. Beckham’s law combines a preferential 24% rate on salary with the full exclusion of foreign non-employment income from Spanish taxation, making it particularly attractive for globally mobile professionals.
Madrid’s deduction, by contrast, is a capital-driven incentive that applies only under the ordinary IRPF regime. This entails full worldwide taxation and a six-year tax-residency requirement.
Determining which regime is optimal requires careful analysis of the taxpayer’s income composition, mobility profile, and investment capacity.
