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Rehabilitation of housing: how to opt for aid and incentives and benefit from reduced VAT | Economy

The years 2022 and 2023 are called to be those that give a definitive boost to residential rehabilitation in Spain. The Recovery Plan that channels European funds reserves a significant pinch, of 6,820 million euros, to the housing item, with special emphasis on interventions designed to improve energy efficiency. Precisely for this reason, the Government has designed, with the approval of the EU, a package of aid and tax incentives designed to encourage taxpayers to carry out these works.

In this context, the Superior Council of Architects of Spain and the General Council of Economists of Spain yesterday presented the Guide on tax relief for the rehabilitation of homes and residential buildingswhere the new tax benefits and their articulation with the main taxes that affect the rehabilitation activity are exposed: VAT and personal income tax.

three deductions

The plan establishes three types of deductions and aid, two designed for private homes and another designed directly for interventions in entire residential buildings.

Thus, for works in the main residence that reduce the demand for heating and cooling by 7%, something that can be achieved by installing high-performance windows, a 20% deduction is opted for, with a maximum of 5,000 euros per home per year. The deduction can be made in the tax period in which the energy certificate is issued, always before January 1, 2023.

Subsequently, interventions that reduce the non-renewable energy consumption of the home by 30% or improve the energy rating to A or B may benefit from a 40% deduction, with a maximum of 7,500 euros per year. In this case, the deduction of the amounts paid may be made from October 6, 2021 to December 31, 2022 in the case of the habitual residence or a rented house. Also in those that are offered in the rental market and are rented before the last day of the year 2023. As in the previous case, an energy certificate is once again necessary to validate the intervention.

In the last great case, a deduction of 60% and a maximum of 15,000 euros is reached for energy rehabilitation actions in residential buildings where consumption falls by 30% or certification A or B is achieved. In this case, remember the guide , the time to deduct is in the years 2021, 2022 and 2023, in relation to the amounts paid in each of them, provided that the certificate had been issued before January 1, 2024.

As the economists and architects emphasize in the document, “the three deductions are incompatible with each other with respect to the same work. The deduction of 60% for the amounts invested in the rehabilitation of buildings is compatible with the deductions of 20% or 40% for actions in the private home, always considering that they are different works.

Income tax and VAT

Economists and architects remind that this public aid is exempt from paying personal income tax and that, in the event of undertaking this type of reform without requesting the subsidy, the total investment up to the tax limit can also be deducted in the tax return. . It is the first time that this type of subsidies are exempt from income tax, a decision by the legislator to promote the great rehabilitation that Spain must undertake.

Regarding VAT, to qualify for the reduced rate it is necessary that the main purpose of the works is the construction of the building and that the cost exceeds 25% of the purchase price. The guide offers a practical example: if the value of a building is one million euros, this amount must be divided between the part that corresponds to the building – for example, 800,000 euros – and the part that corresponds to the land – the remaining 20%. –. In this case, to qualify for the 10% VAT, the cost of the works would have to be greater than 25% of 800,000 euros, that is, 200,000 euros.

The document also indicates that the execution of works is taxed at a reduced rate when the contracts are formalized directly between the promoter and the contractor.

For all these reasons, the general director of Housing and Land of the Ministry of Transport, Mobility and Urban Agenda, Francisco Javier Martín, assured that “aid has never been offered with the intensity that will occur in the coming years, nor the conditions of taxation They’ve been so supportive.”

Practical cases

By way of example, the guide presents several practical cases that allow the impact of aid to be quantified. One of them is part of a comprehensive rehabilitation action in a building with 20 dwellings, as well as inside them. The total cost of the work carried out in the building amounts to 600,000 euros, with a grant of 376,000 euros. Each owner, therefore, has to assume an expense of 30,000 euros. However, between the direct subsidies and the total income tax deductions, the owner would obtain a total of 25,520 euros, so the final cost of the work would only amount to 4,480 euros.

Another case is related to a work carried out in the habitual residence and that reduces the demand for heating and cooling by 10%. The amount of the action amounts in this case to 5,000 euros and a direct subsidy of 2,000 euros has been obtained, to which is added a bonus of 20%, which represents a saving of 600 euros more. The real cost of the intervention, therefore, drops to 2,400 euros.

The last example is that of a work carried out in a rented dwelling, which represents a reduction in the demand for heating and cooling by 10%. The amount of the action amounts to 9,000 euros and a subsidy of 3,000 euros has been obtained. The deduction for the characteristics and results of the intervention reaches in this case 40% of the remaining 6,000 euros, that is, another 2,400 euros. For all these reasons, the final cost of the work would be 3,600 euros.

Situation of Spain

In the country, about 5.5 million residential buildings and about 9.7 million main homes predate the entry into force of the first regulation of the thermal conditions of buildings, in 1980. This means that, at Broadly speaking, the buildings lack energy and thermal benefits, so heating consumption is higher than the average. The guide recalls that, after analyzing the quality of buildings based on their energy rating, it is observed that more than 81% of existing buildings are at a bad or very bad level in terms of emissions, increasing this percentage to 84 .5% in the case of energy consumption. The plan, therefore, seeks to improve the quality of buildings to promote a reduction in consumption and energy expenditure of families and, consequently, a reduction in emissions.

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