Free depreciation for renewable energy investments: Royal Decree-Law 16/2025 of 23 December
In recent financial years, taxation related to investments in the energy transition has gained increasing relevance as a corporate income tax planning tool. Among the available incentives, free depreciation applicable to certain investments that use energy from renewable sources stands out for its direct impact on companies’ tax results, as it allows a significant acceleration of expense deduction.
Far from being a one-off measure, this regime has been progressively consolidated through successive extensions, the most recent of which was approved by Royal Decree-Law 16/2025 of 23 December.
This article analyses the evolution of the legislation since its introduction, its current configuration following the latest reform, and the key requirements that companies should take into account when considering the application of this regime, with particular attention to those aspects that may, in practice, condition its effective use.
Legislative evolution of free depreciation for renewable energy investments and extension of the temporal scope
Free depreciation for investments linked to renewable energy was introduced by Royal Decree-Law 18/2022 of 18 October, through the incorporation of the Seventeenth Additional Provision into Law 27/2014 of 27 November on Corporate Income Tax (LIS).
Subsequently, Article 7 of Royal Decree-Law 9/2024 initially extended its validity, and Royal Decree-Law 16/2025 has further expanded its temporal scope. This latest extension applies to tax periods beginning on or after 1 January 2025. In practical terms, the rule allows free depreciation to be applied to certain investments that use energy from renewable sources and that become operational in the 2023, 2024, 2025 and 2026 financial years, provided that the statutory requirements are met.
Assets eligible for free depreciation
The following investments may benefit from this incentive:
- Installations for self-consumption of electricity using energy from renewable sources, in accordance with Royal Decree 244/2019.
- Thermal installations for own consumption using energy from renewable sources that replace installations using non-renewable fossil fuels.
The following assets are expressly excluded from the incentive:
- Buildings.
- Installations required under the Spanish Technical Building Code, except for the portion of the cost corresponding to installed capacity exceeding the minimum legally required.
Maximum limit of the incentivised investment
Free depreciation applies with a maximum investment limit of EUR 500,000, regardless of the size of the entity or the total volume of investment undertaken.
Key requirement: maintenance of employment levels
One of the essential conditions for applying the incentive is the maintenance of the average workforce for the 24 months following the start of the tax period in which the assets become operational, compared with the average workforce during the preceding 12 months.
The calculation of the average workforce is carried out in accordance with labour law, weighting employees according to their contracted working hours relative to full-time employment.
Although this requirement may appear straightforward, in practice it requires continuous monitoring, as any significant variation in the average workforce during the maintenance period may require the incentive to be regularised. This would involve paying the full tax liability corresponding to the excess depreciation applied, together with late-payment interest. The regularisation must be carried out in the self-assessment for the tax period in which the breach occurs.
Small and medium-sized enterprises: incompatibility
There is an incompatibility affecting entities classified as small enterprises (empresas de reducida dimensión). Such entities must choose between:
- Applying the general free depreciation regime linked to job creation and maintenance regulated in Article 102 LIS, or
- Applying the free depreciation regime for renewable energy investments regulated in the Seventeenth Additional Provision of the LIS.
This incompatibility makes a prior comparative analysis essential in order to determine which incentive is more advantageous in each specific case.
Definition of renewable energy from renewable sources
The Seventeenth Additional Provision of the Corporate Income Tax Act refers to a broad concept of renewable energy, aligned with Directive (EU) 2018/2001. In particular, non-fossil renewable sources include, among others, wind, solar (thermal and photovoltaic), geothermal, hydropower, biomass and renewable gases such as biogas and biomethane.
However, the provision introduces specific technical requirements depending on the type of installation:
- For electricity generation installations, only energy produced by installations classified under category b) of Article 2.1 of Royal Decree 413/2014 is considered renewable.
- For electrically driven heat pumps, a minimum performance threshold is required (SCOPnet ≥ 2.5 for heating or SPFplow ≥ 1.4 for cooling).
- For renewable thermal energy systems used for heating, air conditioning or domestic hot water, a minimum reduction of 30% in non-renewable primary energy consumption must be demonstrated, or an improvement in the energy rating to Class A or B, which qualifies these systems as renewable.
Formal requirements and supporting documentation
In addition to correctly identifying renewable energy sources, a number of formal requirements and supporting documents must be complied with.
- Operating authorisation and registration in the RAIPREE or an electrical installation certificate, depending on installed capacity.
- Registration in renewable gas production registers, where applicable.
- Certificates or reports issued by the competent regional authority.
- Energy efficiency certificates issued before and after the investment, in the case of thermal installations for heating or domestic hot water.
Conclusions on the Seventeenth Additional Provision of the LIS
This incentive constitutes an attractive tax tool for companies undertaking electricity self-consumption projects or replacing non-renewable fossil fuels. It offers an opportunity to accelerate tax deductions and optimise the financial planning of energy investments.
In this context, proper professional advice is essential to maximise the tax benefit of the incentive and to avoid future adjustments that could undermine the advantages obtained.
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