Leasing of properties intended for housing
Regulations: Art. 23.2 Law Income Tax
Reduction 60%
In the case leasing real estate for residential purposes, the positive net income, calculated by the difference between the total gross income and the necessary expenses that are considered deductible in the terms discussed above will reduced by 60 , regardless of the age of the tenant.
Delimitation of " leasing of a property intended for housing" :
It is considered that this is a lease of a property intended for housing when, in accordance with the provisions of article 2 of Law 29/1994, of November 24, on Urban Leases (LAU), the lease falls on "a habitable building whose primary purpose is to satisfy the permanent housing need of the tenant."
For its part, it must be taken into account that article 3 of the LAU provides that "a lease for use other than housing is considered to be a lease that, falling on a building, has as its primary purpose a purpose other than that established in the previous article." He added that "in particular, this consideration will be given to urban property leases made for the season, be it summer or any other season." Therefore, in no case will the indicated reduction be applicable when the property is leased for a season, be it summer or any other.
The reduction will be applicable to the net income derived from the leasing of real estate when the tenant is a legal entity, and it is proven that the property is intended for the housing of certain natural persons (Criterion established by the Central Economic-Administrative Court, in its Resolution of September 8, 2016, in an extraordinary appeal for the unification of criteria).
The wording of article 23.2 of the Income Tax Law establishes that this reduction will only be applicable positive net income that has been calculated by the taxpayer in a self-assessment filed before a data verification procedure, limited verification or inspection has been initiated that includes the of such income among its objectives.
In no case will the reduction apply to the part of the positive net income derived from income not included or expenses improperly deducted in the taxpayer's self-assessment and that are regularized in any of the procedures mentioned in the previous paragraph, even when these circumstances have been declared or accepted by the taxpayer during the processing of the procedure .
Please note that the judgment of TS 1312/2020 (appeal 1434/2019), based on the distinction between declaration and self-assessment, established as an interpretive criterion in relation to the wording prior to July 11, 2021, which provided that the 60% reduction "was only applicable to the income declared by the taxpayer", that said reduction was not lost due to not having included the income in the self-assessment and, therefore, that taxpayers could, when regularized, include undeclared income and request the application of the 60% reduction on the resulting net income.
As a consequence of the aforementioned interpretative criterion established by the ruling of TS 1312/2020 and, in order to definitively clarify that the reduction for the lease of real estate intended for housing cannot be applied to the positive net return calculated during the processing of verification procedure, the wording of article 23.2 of the Personal Income Tax Law has been modified, with effect from July 11, 2021, by article.3.three of the Law 11/2021, of July 9, on measures to prevent and combat tax fraud, transposing Council Directive ( EU ) 2016/1164, of July 12 of 2016, which establishes rules against tax avoidance practices that directly affect the functioning of the internal market, modifying various tax rules and the regulation of gambling.
Tourist rentals:
The 60% reduction provided for in article 23.2 of the Personal Income Tax Law is not applicable to tourist rentals, since their purpose is not to satisfy a permanent housing need but rather to cover a temporary need. See in this regard the Resolution of the Central Economic-Administrative Court (TEAC), dated March 8, 2018, Claim number 00/05663/2017 , issued in an extraordinary appeal for unification of criteria.
On the other hand, with effect from June 26, 2021, the second Final Provision of Royal Decree 366/2021, of May 25, by which the procedure for presentation and entry of self-assessments of the Tax on Financial Transactions and other tax regulations are modified, reintroduces article 54 ter of the General Regulation of actions and procedures for tax and development management and inspection of the common rules of tax application procedures, approved by Royal Decree 1065/2007, of July 27, which regulates the obligation to report on the transfer of use of homes for tourist purposes in the same terms of the previous article 54 ter that was annulled and rendered ineffective by Sentence number 1106/2020, of July 23, 2020, of the Third Chamber of the Court Supreme Court (contentious-administrative appeal number 80/2018) for not having notified the European Commission, a requirement required by Directive ( EU ) 2015/1535 of the European Parliament and the Council, of September 9, 2015 for its validity (ROJ: STS 2494/2020).
For the purposes of preventing tax fraud, Article 54 ter establishes a specific information obligation for persons or entities, in particular, the so-called "collaborative platforms", which mediate in the transfer of the use of housing for tourist purposes. The transfer of use of housing for tourist purposes is understood as the temporary transfer of use of all or part of a furnished and equipped home in conditions for immediate use, regardless of the channel through which it is marketed or promoted and carried out free of charge or for a fee. Expressly excluded from this concept are the leasing or subleasing of housing as defined in Law 29/1994, of November 24, on Urban Leases, and tourist accommodation regulated by its specific regulations such as hotel establishments, accommodation in rural areas, hostels and tourist camps, among others. Likewise, the right to time-share use of real estate is excluded.