The purpose of these notes is to summarise the special tax regime for entities whose main economic activity is the rental of homes. The main incentives affect Corporation Tax (IS) and Value Added Tax (VAT).

Corporation Tax (IS)

Law 27/2014 on Corporation Tax (LIS) develops this special regime in articles 48 and 49. The most important characteristics and requirements to be able to benefit from the regime and enjoy the bonus are listed below:
  • Companies whose main (non-exclusive) economic activity is the rental of homes located in Spanish territory can benefit from the regime.
  • The entity must have material and personal means. It is considered that in the leasing of real estate, economic activity is carried out when at least one person employed on a full-time job is used. However, the Administration has interpreted that if the management of the leasing activity is transferred to third parties that have that organization (e.g. an A.P.I) of personal resources that are necessary to carry out such activity, this requirement is also considered fulfilled.
  • Housing leasing is understood as the one defined in article 2.1 of the Urban Leasing Law (LAU). It is important to note that the dwelling must be permanent for the tenant and, therefore, dwellings that are intended to satisfy temporary needs are excluded.
  • Furniture, storage rooms, car parks (with a maximum of two) are assimilated to homes and business premises are excluded.
  • The homes must have been built, promoted or acquired by the entity.
  • The number of homes rented or offered for lease for each tax period must at all times be equal to or greater than eight.
  • Homes must be leased or offered for lease for at least three years. This period will be computed:
    • If the dwellings belong to the entity before availing themselves of the scheme, from the start date of the tax period in which the option is communicated by the scheme, provided that the dwelling was rented on that date.
    • Otherwise, from the date, the homes were rented for the first time by her.
  • The activity of real estate development and that of leasing must be recorded separately for each property with the necessary breakdown to know the rent corresponding to each dwelling.
  • In the case of entities that carry out activities complementary to that of housing leasing, the incomes eligible for the discount must:
    • Be greater than 55% of the total income for the tax period, excluding those derived from the transfer of leased properties once the minimum period of three years has elapsed,
    • or alternatively, that at least 55% of the value of the entity’s assets is capable of generating income that is entitled to the application of the bonus.
  • The application of this regime is optional. For this reason, the option for the same must be communicated to the tax administration, and it will be applied in the tax period that ends after said communication and in subsequent periods as long as it is not waived.
  • The LIS establishes some incompatibilities with the application of the following special regimes: Economic interest groups, UTEs and venture capital companies, Collective investment institutions, Mining and research and exploitation of hydrocarbons.
  • The entities to which the tax incentives for SMEs are applicable may choose between applying said incentives or applying the housing lease regime.
  • The part of the full fee that corresponds to the income derived from the rental of homes that meet the requirements for the application of this regime will have a bonus of 85%. Therefore, the current effective rate will be 3.75%.
  • The bonus is incompatible with the capitalization reserve. Nor is it applicable to the income generated in the transfer of the dwellings.
  • When the entity distributes dividends, and the partner is a legal entity, it will be necessary to differentiate whether or not the income to which the bonus has been applied is charged and the exemption provided for in article 21 of the LIS will be applied on 50% of its amount. All of this requires meticulous control by the entity that distributes dividends or reserves.
  • Transfer of shares of the entity:
    • Natural person partner: the gain obtained is taxed under the general personal income tax regime.
    • Legal person partner: the exemption of the part of the income obtained that corresponds to subsidized reserves of the entity is reduced by 50%, regardless of when the transfer is made and the applicable tax regime at this time.
  • The general IRNR rules apply to non-resident members.
    • The dividends distributed by the entity are considered obtained in Spanish territory and, therefore, are taxed at 19% or at the rate established in the CDI. However, if the dividend is exempt in Spain, the non-resident partner will only be taxed in their country of residence.
    • In the transfer of shares, the partner will be taxed if there is CDI in the State of his residence. If there is not, it will be taxed in Spain, and you will not be able to enjoy the exemption.

Value Added Tax (IVA)

Article 91.dos.1.6º of Law 37/92 (LIVA) provides, in its second paragraph, the application of the reduced tax rate of 4% to deliveries of homes that are acquired by entities that apply the special regime provided for in articles 48 and 49 of the LIS, provided that the income derived from its subsequent lease applies to the bonus established in the aforementioned articles.

The acquiring entity must notify the taxpayer, before the accrual of the transaction, that it has the right to apply the special regime and that the rents are applicable to the income derived from its subsequent lease. Such circumstances may be proven by means of a written statement signed by the aforementioned addressee addressed to the taxpayer, stating, under his responsibility, compliance.

The application of the reduced rate of 4% applies to the acquisitions of finished homes made by an entity that, at the time of said acquisition, still did not meet the requirements to be able to apply the special regime provided for in the LIS, provided that it said the entity had the intention, confirmed by objective elements that must be present on the acquisition date, to dedicate the homes it acquires in the year following the lease and will be entitled to the bonus established in article 49.1 of the LIS regarding the income that will be received from the referred lease.

Conclusion

The special regime explained above is a very interesting option for entities that own more than eight homes that are dedicated to renting them.

The most important tax benefits are the taxation by I.S. at 3.75% (instead of 25%) and by VAT, on the acquisition of homes, at 4% (instead of 10%).

Our Tax Department is at your disposal, ready to solve any doubts you may have.

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