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Practical Income Manual 2021.

Estimated real estate capital returns and related transactions

Estimated returns on real estate capital

Regulations:  Articles 6.5 and 40.1 Law Personal Income Tax

The benefits of goods or rights capable of generating income from real estate capital are presumed to be remunerated, unless proven otherwise.

In the absence of evidence to the contrary, the valuation of said returns will be carried out at their normal market value, with normal market value being understood as the consideration that would be agreed between independent parties, unless proven otherwise.

However, in the case of leases or subleases of real estate or the constitution or transfer of rights or powers of use over them made to family members, up to and including the third degree, the total net return may not be less than the imputed income derived from said property. This special valuation rule is discussed in the section "Minimum computable income in case of relationship" of this same Chapter.

Returns on real estate capital and related operations

Regulations: Art. 41 Law Personal Income Tax

In the event that the lease or sublease of real estate or the constitution or transfer of rights or powers of use or enjoyment thereof is carried out to a company with which there are related relationships, in the terms provided for in article 18 of Law 27/2014, of November 27, on Corporate Tax ( BOE of 28), the taxpayer of Personal Income Tax must imperatively its valuation at the normal market value. Normal market value will be understood as that which would have been agreed upon by independent persons or entities under conditions of free competition.

To this end, the taxpayer of Personal Income Tax must comply with the documentation obligations of related-party transactions in the terms and conditions established in Chapter V (articles 13 to 16) of the Corporate Tax Regulations. , approved by Royal Decree 634/2015, of July 10 ( BOE of 11).