We would like to remind you of the existence of a special tax regime for entities dedicated to leasing in the Corporate Income Tax, which may be of interest in certain cases due to the allowance provided for in the regulation, provided that a series of requirements are met.
This special corporate income tax regime can be applied by entities whose assets include 8 or more dwellings leased or offered for lease for at least 3 years. In order to use this special regime it is necessary that the lease is developed as an economic activity, that is to say, it must have a person with an employment contract and full time.
It is possible that the doubt has arisen to him of which would be the benefits of constituting a company dedicated to the renting of housings, whose main benefit at fiscal level is the rebate of the integral quota.
Well, in this circular we would like to remind you of the existence of a special tax regime for entities dedicated to leasing in the Corporate Income Tax, which can be interesting in certain cases due to the rebate provided for in the regulation (40% rebate on the part of the gross tax liability corresponding to the income derived from the leasing of dwellings), provided that a series of requirements are met.
This tax regime means a reduction of the tax burden of companies engaged in this leasing activity, although this type of companies make sense when we are talking about large volumes of real estate, where the overall amount of rent that can benefit from the rebate is significant. In addition, these entities can enjoy a super-reduced VAT rate of 4% on the purchase of the properties used for this activity, instead of the usual 10% on the purchase of this type of real estate.
The special regime is currently regulated in articles 48 and 49 of the Corporate Income Tax Law (LIS) and was approved in order to stimulate the real estate rental housing market and to respond to the social need for a rental housing stock.
Scope of application
Companies whose main economic activity is the rental of dwellings located in Spanish territory that they have built, promoted or acquired may be covered by this regime.
However, this activity is compatible with:
- The performance of other complementary activities.
- The transfer of the leased properties once the minimum period of 3 years has elapsed during which the dwellings must remain leased or offered for lease.
Definition of lease of housing
For the purposes of the application of this special regime, the lease of housing will only be understood as that defined in Article 2.1 of Law 29/1994, of November 24, 1994, on Urban Leases (LAU), provided that the requirements and conditions established in said Law for housing lease contracts are met.
Specifically, a dwelling lease is considered to be a lease of a habitable building whose primary purpose is to satisfy the permanent housing needs of the lessee.
Furniture, storage rooms, parking spaces with a maximum of two, and any other dependencies, leased spaces or services assigned as accessories to the property by the lessor, excluding business premises, will be considered as housing, if they are leased together with the dwelling.
Option to the regime
Entities intending to opt for the regime for entities engaged in the leasing of housing must notify the tax authorities of their intention to do so. The special tax regime will be applied in the tax period ending after such notification and in the successive tax periods ending before the tax authorities are notified of the waiver of the regime.
Such entities may not opt for this special regime when applying any of the other special regimes regulated in Title VII of the LIS, except for tax consolidation, international tax transparency and mergers, spin-offs, asset contributions, exchange of securities and certain financial leasing contracts.
However, entities that are of reduced size may choose between applying their special regime or that of entities engaged in the leasing of housing. For these purposes, the application of the regime of the entities dedicated to the lease of housing is incompatible in the same tax period with the application of the tax incentives of the companies of reduced dimension, both if these incentives come from the same tax period in which the entity fulfills the requirements to be considered as of reduced dimension and if they come from a previous one.
The application of the regime for entities engaged in the leasing of housing is incompatible in the same tax period with the application of the tax incentives for small companies, whether such incentives come from the same tax period in which the entity meets the requirements to be considered as small or from a previous one, and the entity may opt for one or the other tax regime (DGT V2637-20).
Requirements to be able to apply this special regime
To be able to apply this special regime, entities must meet the following requirements:
- The number of dwellings leased or offered for lease by the entity in each tax period must always be equal to or greater than 8. In this regard, with regard to the ownership of the dwellings, it is required that the dwellings have been built, promoted or acquired by the company, so that dwellings held by virtue of any other legal title, such as usufruct, temporary right of exploitation or lease, cannot be included in the computation of the number of dwellings leased or offered for lease by the entity.
- The dwellings must remain leased or offered for lease for at least 3 years, which period shall be calculated as follows:
- In the case of dwellings that appear in the assets of the entity prior to the moment of joining the regime, from the date of the beginning of the tax period in which the option for the regime is communicated, provided that at that date the dwelling was leased. Otherwise, the provisions of letter b) below will be applicable.
- If the dwellings have been subsequently acquired or developed by the entity, from the date on which they were first leased by it.
Failure to comply with this requirement will result in the loss of the tax credit that would have corresponded to each home. In this case, the entity must pay, together with the corporate income tax liability corresponding to the tax period in which the noncompliance occurred, the amount of the allowances applied in all the tax periods in which this special regime would have been applicable, without prejudice to the applicable late payment interest, surcharges and penalties. However, it is considered that the noncompliance with this requirement in a tax period does not prevent that, in subsequent tax periods, if the entity does not waive the special regime, the special regime can continue to be applied, if all the requirements foreseen for this purpose are met.
This regime can be applied by entities that have in their assets 8 or more dwellings leased or offered for lease for at least 3 years. To use this special regime, it is necessary that the lease is developed as an economic activity, that is, it must have a person with an employment contract and full time (TEAC, of July 5, 2016).
- For each property acquired or developed, the real estate development and leasing activities must be accounted for separately, with the necessary breakdown to determine the rent corresponding to each dwelling, premises or independent registered property into which such properties are divided.
In order to apply this regime it is necessary to keep separate accounts for each property when the company carries out any activity other than leasing. In this way there will be a sufficient breakdown to know the income attributable to each dwelling, premises or registered property.
4. In the case of entities that carry out activities complementary to the main economic activity of housing rental, at least 55% of the income for the tax period, excluding that derived from the transfer of the rented properties once the minimum maintenance period of 3 years referred to in point 2 above has expired, or alternatively at least 55% of the value of the assets of the entity must be capable of generating income that qualifies for the application of the rebate provided for in this special regime.
Allowances.
The tax incentive consists of applying a 40% rebate to the part of the gross tax liability corresponding to the income derived from the rental of dwellings.
The income to be subsidized will be, for each dwelling, the full income obtained, minus the tax-deductible expenses directly related to the obtaining of such income and the part of the general expenses that correspond proportionally to such income.
In the case of dwellings acquired under financial leasing contracts (Chapter XII of Title VII of the LIS), to calculate the income to be subsidized, the corrections derived from the application of said special regime will not be considered.
Incompatibilities: This allowance is incompatible with the capitalization reserve. In this way, a double tax incentive on the same profit is avoided.
Dividends charged against subsidized income: in the case of dividends or shares in profits distributed against income to which this allowance has been applied, the exemption provided for in Article 21 of the LIS to avoid double taxation of dividends will be applied to 50% of the amount thereof. Such dividends or shares in profits will not be subject to elimination when the entity is taxed under the tax consolidation regime. For these purposes, it will be considered that the first profit distributed comes from non-bonified income.
In the case of distribution of dividends, the individual partners integrate them in the savings taxable base and the legal entity partners, with significant participation, may apply a 50% exemption when they come from subsidized profits (If the entity has obtained subsidized income and others have not, it is considered that the first distributed profit comes from non-bonified income).
One of the problems that has been dragging this regime since the bonus was reduced in 2022, is that if these entities distribute dividends to a parent or holding entity on which they depend, they can only apply the double taxation exemption (currently 95%) to 50% of this income, which makes this regime not so attractive if recurring dividend distributions are expected, rather than reinvestment.
In the case of individual shareholders, the dividend received by them must be integrated at 100% in their personal income tax, as savings income, as with any other company.
Transfer of shares of entities under the special regime
On the income obtained on the transfer of shares in the capital of entities that have applied the special regime, the general corporate income tax rules will apply. However, if Article 21 of the LIS is applicable, the part of the income corresponding to reserves from undistributed retained earnings will be entitled to the exemption provided therein on 50 percent of such reserves. Such income will not be subject to elimination when the transfer corresponds to an internal transaction within a tax group.
Given that the rental activity from a certain volume can imply a significant increase in the tax rate and a high tax bill in personal income tax, it is advisable to analyze different options to optimize the taxation of this activity.
For further information, please consult with Tax consulting
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