For Americans considering a move to Spain, the new Mbappé law offers a rare chance to reduce taxes and invest strategically. Officially Law 4/2024, it provides a deduction of the regional portion of income tax based on 20% of the value of eligible investments for residents in the Community of Madrid. Named after French soccer player Kylian Mbappé, whose high-profile move inspired Spain to attract foreign talent, the law aims to position Madrid as a hub for global investors. In this article, we explain what Americans moving to Spain need to know.
What is the Mbappé law?
The Mbappé law is a regional tax incentive in Madrid. Effective from January 1st, 2024. It allows new residents to deduct 20% of the value of qualifying investments from their regional Personal Income Tax (IRPF). Unlike the Beckham law, which is Spain-wide targets employment income, the Mbappé law focuses on investment income for new residents in Madrid, making it especially relevant for US expats looking to grow wealth abroad.
Eligible assets include bonds, treasury bills, and shares companies. Real estate investments are excluded. The law encourages long-term investment and residency, helping Madrid attract high-net-worth individuals and entrepreneurs.
Who qualifies for the law?
To qualify, US citizens considering relocation:
- Must not have been a Spanish tax resident in the last five years.
- Must establish tax residency in Madrid starting after January 1, 2024.
- Must maintain tax residency in Madrid for at least six years.
These criteria aim to attract investors committed to the region. US expats should plan ahead to ensure they meet all requirements before applying for deductions.
Eligible investments
The Mbappé law covers income from several types of investments:
- Bonds and debentures issued by Spanish or EU entities.
- Treasury bills from Spain or approved European governments.
- Shares of listed and unlisted companies.
- Contributions to limited liability companies (with ownership restrictions).
Restrictions include:
- No investments in tax haven entities.
- Ownership cannot exceed 40% of a company, including indirect holdings through relatives.
How the deduction works
The 20% deduction applies to the acquisition value of qualifying investments, including associated costs but excluding interest. For example, a €1 million investment can reduce the regional portion (around 50%) of your Spanish personal income tax liability by €200,000. Any excess deduction can be carried forward for five years, offering flexibility for investors with growing portfolios.
For American investors used to US tax credits and deductions, this system functions similarly to a regional investment incentive. It rewards those who commit capital and maintain residency.
Comparing the Mbappé law and the Beckham law
Spain has a history of tax incentives for foreign residents. The Beckham law, introduced in 2005, targets employees by offering a flat 24% rate on employment income for six years. The Mbappé law takes a different approach and creates an incentive to invest locally, making it more relevant for entrepreneurs, investors, and high-net-worth US expatriates. Choosing the right incentive depends on your income source.
For example, an American tech executive relocating for work might benefit from the Beckham law’s flat rate, while a retired investor with significant capital could find the Mbappé law far more useful.
Considerations for US expats
US citizens are taxed on worldwide income. While the Mbappé law reduces Spanish taxes, you must still report all income to the IRS. Key considerations include:
- Reporting global income annually.
- Claiming the Foreign Earned Income Exclusion and Foreign Tax Credit to prevent double taxation.
- Note also that certain types of non-US investments can trigger complex reporting requirements, so always seek advice from a US expat specialist financial advisor before investing as an overseas American.
A tax advisor familiar with both US and Spanish law can help you align the two systems. Without proper coordination, you could lose part of your benefit through double taxation or compliance penalties.
A practical example for a US investor
A US expat named Jane who moves to Madrid in 2035 and invests €2 million in eligible Spanish bonds and shares. The 20% deduction reduces her regional IRPF liability by €400,000. If her liability is €300,000 for the first year, she can carry forward €100,000 to offset future taxes.
By maintaining residency for six years and managing investments strategically, Jane builds both her portfolio and her long-term financial footprint in Spain. This scenario highlights the law’s strength: it rewards patience, commitment, and smart capital allocation.
Tips for American considering moving to Madrid
- Plan your move early. Gather documentation proving your new residency and investment timeline. Talk to your US financial institutions for find out their policies regarding retaining clients who move abroad.
- Review investments carefully. Choose assets that qualify under the law while also meeting your personal financial goals.
- Research local and US reporting requirements. Noncompliance can erase potential tax advantages.
- Partner with experts. Choose advisors fluent in both Spanish and US tax systems for seamless planning.
For expats unused to complex US tax laws, dual reporting can seem daunting. Working with professionals simplifies the process and ensures every deduction counts.
Final thoughts
The Mbappé law is an incentive for US expats to grow wealth, invest strategically, and take part in Madrid’s rise as a European financial center. With the right strategy, Americans can reduce taxes legally while building a diversified international portfolio.
By understanding the eligibility rules, investment options, and ongoing compliance requirements, you can turn this incentive into a cornerstone of your global financial plan. Professional guidance ensures you comply with both Spanish and US laws while maximizing the advantages available under this new regime.
For Americans living abroad or considering a move to Spain, the Mbappé law could redefine how you structure your investments and manage your tax exposure.
If you have any questions about your situation or require assistance managing your investments as an American living abroad, get in touch.
This article is for informational purposes only; it is not intended to offer advice or guidance on legal, tax, or investment matters. Such advice can be given only with full understanding of a person’s specific situation.
