Transitional scheme

Law 26/2014, of November 27, which modifies Law 35/2006, of November 28, on Personal Income Tax, the revised text of the Non-Resident Income Tax Law, approved by Royal Legislative Decree 5/2004, of March 5, and other tax regulations ( BOE of the 28th) has eliminated, with effect from January 1, 2015, the deduction for rent of the habitual residence.

However, for taxpayers who were previously deducting their rental income, a transitional regime is being introduced that allows them to continue enjoying the deduction under the same terms and conditions existing on 31 December 2014.

To whom does the transitional regime apply?

Taxpayers who meet the following conditions may apply the deduction for renting their habitual residence:

1. Those who had entered into a rental agreement prior to January 1, 2015, by which they had paid, prior to said date, amounts for the rent of their habitual residence.

   The taxpayer will be entitled to the deduction for renting a habitual residence during the tax periods in which, as a result of its extension, the validity of the lease contract signed prior to January 1, 2015 remains in effect.

   However, the signing of a new lease contract for the same habitual residence at the end of the initial contract or to modify the agreed conditions, including, among others, the rental price, is considered, for the exclusive purposes of applying the transitional regime, as a continuation of the previous one, and therefore will not prevent the right to continue applying the deduction.

   Likewise, for the exclusive purposes of applying the transitional regime, the signing of a new lease contract will be considered as a continuation of the previous one in the event of a change of landlord due to the transfer of the property, such as the replacement of the former landlord by his heir due to the death of the former, sale or payment in kind.

2. That they would have been entitled to a deduction for rent on their habitual residence in relation to the amounts paid for renting said residence in a tax period accrued prior to 1 January 2015.

   The transitional regime will apply if the contract was signed before 2015 even if the deduction for rent of habitual residence was not applied in 2014 and/or previous years despite having met the requirements for its application.

How the deduction is applied in the transitional regime

The fifteenth transitional provision of the Income Tax Law maintains, for taxpayers who are entitled to the transitional regime, the application of the regulations contained in articles 67.1, 68.7 and 77.1 of the Tax Law, in its version in force on December 31 2014.

Amount and requirements for applying the deduction

Without prejudice to the deduction for rent of habitual residence that, where appropriate, each Autonomous Community has approved for the year 2020, taxpayers may deduct 10.05% of the amounts paid in tax period for the rent of their habitual residence, provided that their taxable base is less than 24,107.20 euros per year.

The taxpayer's taxable base is formed by the sum of the amounts entered in boxes [0435] (general taxable base) and [0460] (savings taxable base) of the declaration.

Maximum deduction base

The maximum base for this deduction is:

1. 9,040 euros per year , when the taxable base is equal to or less than 17,707.20 euros per year.

2. 9,040 – [1.4125 x ( BI – 17,707.20)] , when the taxable base is between 17,707.20 and 24,107.20 euros per year.

   BI being the taxpayer's taxable base. That is, the sum of the amounts reflected in boxes [0435] (general tax base) and [0460] (savings tax base) of the declaration.

Note: Taxpayers entitled to apply the transitional regime whose taxable base, in the terms discussed above, is equal to or greater than 24,107.20 euros per year, in individual taxation or joint taxation, will not be able to apply this deduction.