DANA: Damage tax measures approved - RDL 6/2024

On 6 November 2024, Royal Decree Law 6/2024 was published in the BOE with effect from 7 November 2024. This regulation introduces several fiscal measures aimed at municipalities affected by the DANA between 28 October and 4 November 2024. In this article, we will detail the most relevant tax measures and analyse how they influence taxpayers, companies and specific sectors.

As a result of the heavy rainfall and flooding that occurred on 29 October 2024 due to a DANA that affected the Valencia Region, Castile-La Mancha, Andalusia, Catalonia and, to a lesser extent, the Balearic Islands and Aragon, a first package of tax measures has been adopted, economic and social measures to deal with the devastating effects that the DANA has caused in the lives of thousands of people, in order to address and cover the various personal and material damages, and to mitigate the severe impacts that this natural disaster has had on the socio-economic sphere.

The most affected areas were, in the province of Valencia, the area of Utiel-Requena, l'Horta Sud, the Ribera Alta and Baja and the Comarca de los Serranos; in Albacete, the municipality of Letur; in Cuenca, the municipality of Mira; and in Andalusia, various parts of the provinces of Malaga, Almeria, Granada, Seville, Huelva and Cadiz, which are listed in the annex to the regulation.

Chapter III of the regulation (articles 8 to 17) sets out the tax measures adopted in the face of this catastrophic situation in order to deal with the devastating consequences of the DANA.

We explain the most important tax measures and how they affect specific taxpayers, companies and sectors.

Suspension and extension of tax time limits (Article 8)

Relief from tax liability deadlines is established for taxpayers with tax domicile in the areas affected by the DANA. Several measures are implemented to facilitate compliance with these obligations without imposing additional burdens. The main provisions include:

• Extension of deadlines: Taxpayers in the affected municipalities will be able to postpone the filing and payment of their returns and self-assessments until 30 January 2025. This extension covers both VAT and corporate income tax for groups of companies domiciled in these areas.
• Deferral of tax debt: For eligible taxpayers, a deferral of up to 24 months will be granted for their tax debts, with no interest for late payment during the first six months, providing crucial financial respite.
• Suspension of auction deadlines: Auctions of assets, including those already underway before the entry into force of this Royal Decree-Law (7 November 2024), will see their deadlines suspended. In addition, affected bidders may request the cancellation of their bids and the return of deposits.
• Additional extensions: For ongoing administrative procedures, such as seizures, pleadings or appeals, the deadlines will also be extended to 30 January 2025. This measure covers a variety of administrative procedures and tax reviews, ensuring that affected taxpayers are not adversely affected by the emergency.

Unreleasability of aid (Article 9)

Aid granted under this decree is unattachable, protecting victims by ensuring that these funds are not compromised by outstanding debts. This unattachability applies to both direct aid and tax refunds resulting from the fiscal measures implemented. This provision ensures that the resources allocated to recovery reach those affected in full.

Cadastral measures (Article 10)

The authorities have extended the deadlines for submitting declarations and responding to cadastral requests until 30 January 2025. This affects those with both urban and rural real estate located in the damaged municipalities:

• Submission of cadastral declarations: all administrative procedures and appeals that expired between 28 October and 31 December 2024 may be dealt with until 30 January 2025.
• Suspension of formalities and requirements: The deadlines for formulating allegations, responding to cadastral procedures and other requests will likewise be extended. This extension benefits those who need time to reorganise their damaged property.

Direct aid to enterprises and professionals (Article 11)

The government establishes a system of aid for the self-employed and affected companies located in the damaged areas. The key features of this aid are:

• Amounts of aid: The amounts depend on the volume of business operations in 2023. The self-employed will receive a one-off grant of 5,000€, while companies will receive between 10,000€ and 150,000€, depending on their size and turnover.
• Deadlines and processing: Applications must be sent to the Tax Agency between 19 November and 31 December 2024. Payment will be made by bank transfer from 1 December 2024. This aid will be managed within the framework of the refund procedure, speeding up processing.
• Additional conditions: The Tax Agency may require additional information to verify compliance with the requirements. Applicants must also declare compliance with EU State Aid rules, ensuring transparency and legality in the allocation of funds.

Tax benefits (Article 12)

A series of tax exemptions and reductions are granted to provide relief to those affected in the damaged municipalities:

• IBI exemption: Those with damaged properties are exempted from paying the 2024 Real Estate Tax. In addition, if these properties are uninhabitable and the owners must relocate, this exemption applies in full.
• IAE reduction: Businesses that temporarily cease their activity due to damage may benefit from a proportional reduction of the Business Activity Tax.
• Exemptions from traffic fees: Traffic Headquarters fees for the deregistration of damaged vehicles, as well as the issuing of duplicate circulation or driving licences, will be exempted, provided that the damage is accredited by the DANA. This measure also applies to the issuing or renewal of ID cards in the affected areas.
• Tax refunds: Taxpayers who have already paid these taxes in 2024 can request a refund of their payments if they meet the requirements to benefit from these exemptions.

Special tax concessions for agricultural activities (Article 13)

For the agricultural sector, which has been particularly hard hit by the storm, a reduction in net income tax rates is envisaged. This reduction will be authorised on the basis of reports from the Ministry of Agriculture, allowing affected farmers a lower tax burden reflecting the loss of production and damage suffered.

Financially sustainable investments (Article 14)

Investments to repair damage to local infrastructure are considered ‘financially sustainable,’ which means that they can be implemented in priority over other investments, using dedicated funds and without being affected by the constraints that normally apply to this type of investment.

Funding to Local Entities (Article 15)

Funding is allocated from the Local Entity Financing Fund to cover the costs of urgent repairs and services in the affected areas. This funding covers two years, 2024 and 2025, and is expected to help alleviate the effects of the disaster immediately.

Suspension of payment of the 2nd instalment of personal income tax for the year 2023 (Article 16)

The second instalment payment of personal income tax for 2023 is extended until 5 February 2025 for taxpayers in the affected areas. This measure also applies to payments made by direct debit to financial institutions, where the Tax Agency will coordinate the retrocession of payments already charged. This deferral allows those affected to maintain the continuity of their tax situation without incurring penalties or delays.

In the case of direct debit, the collaborating entities will not make the charge effective until 5 February 2025; and in the event that the charge has already been made, the retrocession will be made within 3 working days following receipt of the communication issued by the AEAT indicating the taxpayers to whom the retrocession is to be made, and the charge will be made again on 5 February 2025.

Exceptions to the extension of time limits for the filing and submission of certain tax returns (Article 17)

Not all returns and self-assessments are subject to this extension. Self-assessments for special schemes for distance sales, services to consumers in the EU and intra-Community transactions (Intrastat) must comply with the usual deadlines, avoiding a possible time lag in the registration of cross-border commercial transactions.

No requirement to be up to date with tax obligations in order to receive aid (Ninth Additional Provision).

To facilitate access to aid, applicants are exempted from the need to be up to date with their tax and social security obligations. This type of exemption is extraordinary and is justified by the circumstances of the emergency, ensuring that those affected are not penalised by administrative circumstances at this critical time.

Exemption from stamp duty for deeds formalising moratoriums on mortgage or non-mortgage loans and credits (Second Final Provision).

This provision includes an amendment to include a specific exemption in the Transfer Tax:

• Formalisation of mortgage moratoriums: a new point 36 is added to Article 45.I.B), which allows exemption from Transfer Tax and Stamp Duty for deeds formalising moratoriums on mortgage or non-mortgage loans. This measure applies specifically to those affected by the DANA and facilitates the renegotiation of credits without additional tax costs. The exemption from this tax on notarial documents related to these moratoriums aims to reduce the economic burden on homeowners, as it avoids the costs of formalising these agreements.

SUMMARY:

Main fiscal measures for damage caused by the DANA: RDL 6/2024