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Practical Income Manual 2022.

Leasing of properties intended for housing

Regulations: Art. 23.2 Law Personal Income Tax

Reduction 60 percent

In the cases of leasing of real estate intended for housing, the positive net return , calculated by the difference between the total income and the necessary expenses that are considered deductible in the terms above commented, it will be reduced by 60 per 100 , regardless of the age of the tenant.

Delimitation of " lease of real estate intended for housing" :

It is considered to be a lease of real estate 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 LAU provides that “a lease for use other than housing is considered to be a lease that falls on a building for its primary purpose.” "one different from that established in the previous article." Also adding that "in particular, leases of urban properties entered into by season, be it summer or any other, will have this consideration." Therefore, in no case will the aforementioned reduction be applicable when the lease of the property is concluded by 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 lessee is a legal entity, and it is proven that the property is intended for the housing of certain natural persons (Criteria 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 Personal Income Tax Law establishes that this reduction will only be applicable on the positive net returns that have been calculated by the taxpayer in a self-assessment submitted before a data verification, limited verification or inspection procedure that includes verification of such returns has been initiated.

In no case will the reduction be applicable with respect to the part of the positive net income derived from income not included or from expenses improperly deducted in the taxpayer's self-assessment and that is regularize in any of the procedures mentioned in the previous paragraph, even when those circumstances have been declared or accepted by the taxpayer during the processing of procedure .

Please note that the ruling of TS 1312/2020 (cassation appeal 1434/2019), based on the distinction between declaration and self-assessment, established as an interpretative criterion in relation to the wording prior to July 11, 2021, which provided that the 60% reduction "was only applicable with respect 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, upon being regularized, include undeclared income and request the application of the 60 percent 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 percent 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 need for housing but rather to cover a temporary need. See in this regard the Resolution of the Central Economic-Administrative Court (TEAC), of March 8, 2018, Claim number 00/05663/2017 , relapsed into 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).

Article 54 ter establishes, for the purposes of preventing tax fraud, a specific information obligation for persons or entities, in particular, the so-called "collaborative platforms", which mediate the transfer of the use of homes for tourist purposes. The transfer of use of housing for tourism purposes is understood to be the temporary transfer of use of all or part of a home furnished and equipped in conditions of immediate use, regardless of the channel through which it is marketed or promoted and carried out for the purpose free or onerous. The leasing or subleasing of housing as defined in Law 29/1994, of November 24, on Urban Leasing, and tourist accommodation regulated by its specific regulations, such as hotel establishments, accommodation in the middle of the country, is expressly excluded from this concept. rural, hostels and tourism camps, among others. Likewise, the right to use real estate in turn is excluded.

Order HAC /612/2021, of June 16, has approved the new model 179, "Quarterly informative declaration of the transfer of use of homes for tourist purposes" and establishes the conditions and the procedure for its presentation.