Energy transition: these are the new tax incentives for renewable energy and electric vehicles in Spain
Unrestricted and accelerated depreciation tax benefits have been available since 2023 for investments in assets that use energy from renewable sources and electric vehicles, respectively. These incentives originated from the Plan+SE program approved by the Council of Ministers in October 2022.
The Plan REPowerEU, put forward by the European Commission on May 18, 2022, contemplates that member states may adopt tax measures to provide an incentive to save energy and reduce the fossil fuel consumption. In particular, it encourages member states to consider the reduction of tax and introduction of relief for purchasing and using electric and hydrogen vehicles, the provision of tax deductions linked to energy savings and the phase-out of environmentally harmful subsidies.
In response to this plan, on October 11, 2022, the Council of Ministers approved the Plan +SE program, which, in measure 55, rolls out tax incentives for the energy transition, aimed at the adoption of solutions that will allow renewable energy to be substituted for the use of fossil fuels, and dependency on energy imports to be reduced.
Under Plan +SE, in the last quarter of 2022 two tax incentives were approved to foment the energy transition, targeted at corporate and personal income taxpayers who carry on economic activities:(i) unrestricted depreciation for investments in assets that use renewable energy; and (ii) accelerated depreciation for certain electric vehicles.
On the one hand, Royal Decree-Law 18/2022 has introduced the option of providing unrestricted depreciation for the investments made available to the taxpayer on or after its entry into force and which are made in plants to be used for the self-supply of electricity, as well as self-supply thermal plants, where they use renewable energy sources and substitute plants using renewable energy sources for energy from non-renewable fossil sources. To substantiate that the investment uses renewable energy, taxpayers will have to be in possession of the documents set out in that royal decree-law.
This incentive will not be able to be elected for buildings or mandatory facilities under the Technical Building Code, unless they have a nominal capacity that is above the required minimum. If that is the case, the taxpayer can provide unrestricted depreciation for a portion of the cost of the plant in the proportion relative to the installed capacity that exceeds that required minimum.
The plants will have to be placed into operation in 2023 and the amount of the investment that may benefit from unrestricted amortization will be capped at €500,000.
This incentive, which may be applied in taxable periods that begin or end in 2023, is subject to a condition that, in the 24 months following the start date of the taxable period in which the purchased assets are placed into operation, the total average workforce headcount of the entity is retained with respect to the average workforce headcount in the preceding 12 months. The company’s total average headcount has to be calculated by reference to the people employed, within the meaning of the labor and employment legislation, taking into account the proportion the working hours in their contracts bear to full-time working hours. In the event of a breach of this obligation to retain jobs, it will be required to pay over the total tax liability relating to the excess amount deducted plus late-payment interest on the self-assessment for the taxable period in which that breach takes place.
Secondly, Law 31/2022 of December 23, 2022 on the General State Budget for 2023 has provided the option of applying accelerated depreciation for investments in new vehicles defined as FCV, FCHV, BEV, REEV or PHEV vehicles, at the rate determined by multiplying by 2 the maximum straight-line rate provided in the officially approved depreciation tables. A condition for applying the incentive is that the vehicles must be used in economic activities and must be placed into operation in taxable periods beginning in 2023, 2024 and 2025.
This incentive, which originated from an amendment by the “Grupo Plural” parliamentary group in the lower house of the Spanish parliament, is aimed at fomenting the circulation of vehicles that are more respectful of the environment and, in particular, market penetration of electric vehicles.
All these incentives give continuity to the gradual environmentalization of business taxation and are a new example of how tax can be a useful tool for encouraging electric and sustainable mobility.