The Community of Madrid will reduce all regional income tax brackets by half a point starting from the 2027 fiscal year. This measure will result in savings of €500 million for 2.9 million taxpayers.
The Community of Madrid will reduce all regional income tax brackets by half a point starting from the fiscal year of 2027. This was confirmed by the Minister of Economy, Rocío Albert, during the presentation of the regional Budget, which the Madrid government brought to the Assembly of Madrid this Friday. According to information published by ABC, the minimum rate will decrease from 8.50 to 8 percent and the maximum will drop from 20.50 to 20 percent.
The reduction will be approved through a specific law in the first quarter of the year, likely in March, just before the Assembly of Madrid is dissolved and regional elections are called for May 23. This measure was already included in the programme with which Isabel Díaz Ayuso won the 2023 elections, although there were doubts about its implementation due to the lack of General State Budgets for the past four years.
The regional government estimates that the reduction will result in savings of €500 million for the people of Madrid. Seventy-one percent of the beneficiaries will have a salary below the average, set at €35,000 gross annually. According to the Community's estimates, the savings will be €635 compared to an average taxpayer in Catalonia and €555 compared to one in Castilla-La Mancha.
The income tax cut adds to six other tax reductions included in the 2027 Budget. By the end of the legislative term, the regional government will have approved 41 tax cuts since 2019, of which 13 affect housing.
Among the new measures are a 100 percent exemption on the Property Transfer Tax for the purchase of works of art and a reduction of the rate of this tax from 6 to 4 percent for the purchase of second-hand primary residences by those under 40 years old. Additionally, the Documented Legal Acts Tax will decrease from 0.75 to 0.4 percent for new homes purchased by those under 40.
To mitigate the effects of the fire in the Western Sierra this summer, there will be a 100 percent exemption on the Donation Tax for individuals up to €10,000. The Property Transfer Tax will also be fully exempted for the purchase of cars replacing those that were damaged, as well as for the same tax and the Documented Legal Acts Tax on the acquisition of properties replacing those damaged by fire.
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