In Spain, companies that rent properties are eligible for the “special regime for the rental of properties”. Under this regime, companies can apply a tax credit of 85% of the tax liability corresponding to the rentals of such properties to their corporate income tax.
To do so, these entities must meet the following requirements, among others:
- They must own at least eight properties that have been rented or offered for rent during the whole year (therefore, properties that they have tried to rent, even if this has not been achieved during the year, are also taken into account).
- They must have had at least one full-time employee to manage the rentals during the financial year (in order to be considered as carrying out an economic activity).
This does not apply to purely asset-holding companies. - These properties must be rented or offered for rent for
at least three years.
If any of them are sold before then, the allowances applied for them must be returned in the year of non-compliance.
A recent decision of the Spanish tax authority has clarified that if a company under this regime rents one of its properties to another company for the latter to use as temporary accommodation for workers (who would be identified in the rental contract), it would NOT be able to continue to enjoy the rebate corresponding to that property.
According to this ruling, only those leases whose primary purpose is to satisfy the tenant’s permanent need for property are eligible for the 85% rebate, not temporary leases. And as in this case the properties are rented to a company that rents them temporarily to its employees, this requirement is not met.
However, the ruling says nothing about what would happen if the property was rented to the employees on a permanent basis. It can be understood that, as the lessee is different from the person who uses the property, the Spanish tax authority would not allow the incentive to be applied in this case either, so that, if the company is covered by the property rental regime, it is preferable to rent only to individuals who will live in the property.
Author : Lexunion España, Barcelone
