The approval of a specific decree law for La Palma The Council of Ministers' decision opens a new phase in the institutional response to the effects of the Tajogaite volcano eruption. After months of negotiations between the central government and the Canary Islands government, one of the most frequently repeated demands of the island authorities and the agricultural sector has finally been met: a 60% tax credit for all taxpayers residing on the island.
This package of measures, focused exclusively on the economic and social consequences of the eruptionIt combines tax relief, an injection of public funds, and financial moratoria. It is not the broader-scale so-called "Canary Islands decree," but it is a significant step within the Canary Islands Agenda and the commitments made by the Government of Spain to the Canary Islands and, in particular, to La Palma.
60% income tax reduction for all residents of La Palma
The core of the decree is the 60% reduction in Personal Income Tax for those who have their tax residence in La Palma. The measure will be applied to the corresponding tax year and will take effect in the income tax return to be filed in 2026so the impact will be felt directly in the pockets of taxpayers on La Palma when they pay the tax.
As detailed by the Minister of Territorial Policy, Ángel Víctor TorresThe bonus will mean that the Tax Agency will stop collecting around 111 millones de eurosThis is a revenue waiver that the central government justifies as part of an extraordinary effort to... economic reconstruction of the islandwhere productive activity - especially in the primary sector - continues to be affected by the consequences of the eruption.
The decision to extend this 60% bonus for all palm tree residents This responds to a demand that had intensified in recent weeks, especially from the Canary Islands Government and the Island Council. Regional authorities insisted that the island needed a temporary, unique tax framework to support the recovery and prevent families and small businesses from being overwhelmed by the tax burden in such an exceptional context.
The regional president himself, Fernando ClavijoHe praised the announcement as an “important step forward” and a “promising start” within the broader negotiations of the Canary Islands Agenda, although he stressed that this regulatory text “is not the Canary Islands decree,” but rather a urgent decree focused on La PalmaEven so, the regional government believes that one of the key commitments agreed with Madrid has been fulfilled.
100 million euros for agricultural properties and new infrastructure
Along with tax relief, the decree incorporates a measure of significant economic impact: authorization for the Government of the Canary Islands to use 100 million euros charged to the regional surplus. This money will be primarily allocated to the recovery of agricultural plantations and of the properties that were damaged or buried by the mudslides in municipalities such as El Paso, Los Llanos de Aridane and Tazacorte.
The funds will be used for both repair affected farms as to finance infrastructure on new properties to replace those expropriated or destroyed by the lava. The goal is to prevent the primary sector, especially bananas, from being permanently damaged and losing ground in the economic structure of the islandMinister Torres emphasized that the aim is to support "the most affected sector, the primary sector," after previous policies focused on compensating for the loss of primary residences.
In parallel, the decree includes the extension of projects financed with funds from the Ministry for Ecological Transition and other state budget items that, if not increased, risked having to return the money. Among the affected projects are the Renovation of the Hotel Monterrey in El Paso, the new PLOCAN headquarters in Tazacorte and projects related to water and biodiversity in different parts of the island.
This extension of deadlines prevents municipalities and the Island Council from losing already committed investments due to their failure to provide justification by the initially planned date. The subsidies of 12 million euros for municipal infrastructure and 3,3 million for the La Palma Island Council They can now justify themselves until end of first quarter 2026, allowing time to complete the works without the pressure of the original deadlines.
Loan moratoriums and financial relief for farmers
Another aspect of the decree is the restoration and expansion of the payment obligation moratoriums for those who went into debt to rebuild or maintain their farms after the eruption. Recovery is underway. temporary suspension of interest, loan installments and credits -with and without mortgage guarantee- linked to properties in the most affected areas.
Those eligible for this financial relief are those who debtors registered in the register of people affected by the volcano whose main income comes from agriculture and are self-employed farmersThe focus is on farms in municipalities such as El Paso, Los Llanos de Aridane and Tazacortewhere the mudslide swept away farms and irrigation systems and forced many farmers to go into debt to maintain their activity or cope with basic expenses.
The royal decree also opens a new deadline to request suspension of payment obligationsThis extends the timeframe for those who have not yet been able to take advantage of the payment holidays to do so now. The intention is to prevent the lack of liquidity from becoming an unsustainable trap for small and medium-sized producers, who in many cases are still reorganizing their land and adapting to new plots or infrastructure.
These financial measures complement the instruments already implemented since the beginning of the volcanic crisis. As Ángel Víctor Torres pointed out, the overall actions of the General State Administration in the The reconstruction of La Palma exceeds 1.100 billion eurosTo which are now added the cost of the IRPF bonus and the use of these 100 million from the regional surplus.
An urgent decree for La Palma within the Canary Islands Agenda
The political context of this decree is marked by the broader negotiation of the so-called Canary Islands AgendaIn the regional government's call for a comprehensive package of measures for the archipelago, the Canary Islands president, Fernando Clavijo, has insisted that the text approved by the Council of Ministers is a specific and urgent instrument for La PalmaMeanwhile, the broader “Canary Islands decree” continues to be discussed and could be released at a later stage.
The now validated content is the result of several meetings between Pedro Sánchez and Fernando Clavijo, as well as subsequent meetings between the Government of Spain and the regional government, in which the First Vice President and Minister of Finance participated, María Jesús Monteroand Ángel Víctor Torres himself. These meetings helped to define both the 60% personal income tax bonus such as the authorization to mobilize the 100 million euros allocated to the agricultural sector.
In the days leading up to the approval, the tone from the Canary Islands had become more heated. The Minister for Ecological Transition and Energy, Mariano Hernández ZapataHe publicly expressed his concern about the delay in adopting the so-called La Palma Decree and demanded that the text clearly include three elements: the 100 million for agricultural farms, the extension of tax relief and the loan moratorium linked to the damage from the volcano.
Zapata warned that he did not want any "shell games with the decree laws" and demanded that what was approved be limited to matters related to the island, without mixing in other issues. He also recalled Minister Torres's commitment that the legislation would be approved by mid-November, something that was ultimately delayed a few days, but which has now been finalized at the Council of Ministers meeting held in Madrid.
Parliamentary procedure and expected political support
Although the decree law comes into force after its publication in the State official newsletterIts continuity over time depends on the validation in the Congress of DeputiesThe Government is confident of achieving broad support, even unanimous backing, given the extraordinary nature of the measures and the existing consensus on the need to continue supporting La Palma.
Everything points to the The People's Party will vote in favorThis would greatly facilitate the process. Mariano Hernández Zapata, a member of the Canary Islands Government and former president of the La Palma Island Council during the eruption, had linked his party's support to the decree clearly including the tax break, the 100 million euros for the agricultural sector, and the new loan moratorium for those affected.
Once the law is approved by the lower house, the measures can be implemented with complete legal certainty and begin to have a noticeable impact on the planning of rental campaigns as in the execution of funded projects and the renegotiation of loans. The government is confident that the timeline will allow the income tax credit to be implemented without delays and that the new aid will arrive in time to sustain economic activity in the coming months.
On the political front, the central government emphasizes that these decisions are part of a sustained commitment to La Palma since the beginning of the eruption, while the Canary Islands government insists that there is still a long way to go in the negotiations. Canary Islands decree and the Canary Islands AgendaIn any case, the 60% reduction in personal income tax and the aid package are considered a significant step in consolidating the reconstruction.
With the combination of 60% discount on income taxWith the use of €100 million of the surplus to recover properties and extensions of moratoriums and subsidies, La Palma has added a new set of specific support measures to address the post-volcanic crisis. It remains to be seen how each measure will be implemented in practice and how it will be integrated into the overall strategy of the Canary Islands Agenda, but, for now, the island's residents have a framework of tax and financial relief intended to provide much-needed support to families, farmers, and local governments while reconstruction efforts continue.
