The Government extends tax aid to La Palma and enables 100 million

The Council of Ministers approved on September 8 the Royal Decree-Law 23/2026, on urgent fiscal and financial measures for the economic and social reconstruction of the island of La Palma, published in the Official State Gazette number 223, of September 9, 2026, in section I of general provisions (p. 120410). The regulation, signed by King Felipe VI and countersigned by the President of the Government, Pedro Sánchez Pérez-Castejón, enters into force the day following its publication.

The decree-law, promoted at the proposal of the ministries of Finance and of Territorial Policy and Democratic Memory, responds to the persistence of situations of vulnerability derived from the volcanic eruption of Cumbre Vieja, which occurred between September and December 2021, and to the need to flexibilize the financial framework of the autonomous communities with surpluses.

Personal Income Tax (IRPF) Deduction for Residents of La Palma

Article 1 modifies, with effect from January 1, 2026, the fifty-seventh additional provision of Law 35/2006 on IRPF, so that the deduction for obtaining income in Ceuta and Melilla is equally applicable, under the same terms and conditions, to taxpayers with habitual and effective residence on the island of La Palma during the tax periods 2022 to 2026.

• The measure also applies to determining the withholding rate and payment on account for employment income.
• It is likewise extended to the installment payment rate for economic activities entitled to the deduction.

100 Million for Those Affected and Autonomous Flexibility

Article 2 enables the Autonomous Community of the Canary Islands to allocate 100 million euros from its financing excesses or surpluses at the close of 2025 to finance aid for individuals and entities affected by the eruption of September 2021, without Article 32 of Organic Law 2/2012 on Budgetary Stability being applicable. The aid will be preferentially oriented toward:

• compensation per unproductive kilogram for 2024, 2025, and 2026;
• the reconstruction of destroyed agricultural infrastructure (tool sheds, stables, water tanks, farms, banana packing plants, agricultural warehouses, or hydraulic works);
• the compensation of reconstruction costs for agricultural estates and the CO2 evacuation system.

Furthermore, autonomous communities with debt relative to regional GDP lower than 12.4% at the close of 2025 and with pending surpluses or financing excesses may finance investments between 2026 and 2028, exempt from reducing their net indebtedness. Article 3 allows the 2025 surplus to be allocated to financially sustainable investments in 2026 and 2027, provided they have not incurred a deficit and maintain the average payment period to suppliers within legal limits.

Relief for farmers and self-employed workers

Article 4 opens a new deadline, until October 15, 2026, for debtors in the municipalities of El Paso, Los Llanos de Aridane, and Tazacorte registered in the Registry of persons affected by volcanic eruptions, whose primary income comes from agriculture, to request a six-month suspension of their loan and credit payment obligations, with or without mortgage guarantees, for the period from October 1, 2026, to March 31, 2027.

Article 5 regulates a new regime for the extraordinary benefit for cessation of activity for self-employed workers affected by the Cumbre Vieja eruption, excluding subsidies from the Community Support Program for Canary Islands Agricultural Productions (POSEI) from the calculation of yields and income, and allowing access to those who started their activity in 2020.

Additional financing and closing

The first additional provision grants an extraordinary credit of 16,840,943.24 euros in the budget of the Ministry of Social Rights, Consumption and 2030 Agenda to execute the Agreement of the Joint Commission of the Economic Concert with the Basque Country of July 9, 2026, regarding dependency. Aid for economic activities will be granted in accordance with European Union regulations on State aid.

The regulation provides a new boost to the reconstruction of La Palma nearly five years after the eruption, while providing greater financial margin to the most solvent autonomous communities to execute investments, in a context of urgency that justifies its processing as a decree-law.

Source: Official State Gazette, no. 223, September 9, 2026, Sec. I, page 120410 (official reference: BOE-A-2026-18828).