Companies whose main economic activity is the rental of homes located in Spanish territory may benefit from the regime of entities dedicated to the rental of housing regulated in Chapter III of Title VII of the LIS. that they have built, promoted or acquired.
However, this activity is compatible with:
- Carrying out other complementary activities.
- The transfer of the leased properties once the minimum period of three years has elapsed in which the homes must remain leased or offered for lease.
For the purposes of the application of this special regime, housing rental will only be understood as that defined in article 2.1 of Law 29/1994, of November 24, on Urban Leases, provided that the requirements and conditions established in said law are met. Law for housing rental contracts.
Regulation: Article 48.1 LIS
Definition of housing lease
A housing lease is considered to be a lease that falls on a habitable building whose primary purpose is to satisfy the tenant’s permanent need for housing, storage rooms, parking spaces with a maximum of two, and any other rooms, leased spaces or services transferred as accessories to the property by the same landlord will be considered as housing. excluding business premises, provided that both are rented jointly with the home.
Option to the regime
Entities that intend to benefit from the regime of entities dedicated to housing leasing must notify it to the Tax Administration. The special tax regime will be applied in the tax period that ends after said communication and in the subsequent ones that end before the renunciation of the regime is communicated to the Tax Administration.
These entities will not be able to opt for this special regime when they apply any of the other special regimes regulated in Title VII of the LIS, except for fiscal consolidation, international tax transparency and mergers, spin-offs, contributions of assets, exchange of securities. and that of certain financial leasing contracts.
However, entities that are considered small may choose between applying their special regime or that of entities dedicated to housing rentals. For these purposes, the application of the regime for entities dedicated to housing rentals is incompatible in the same tax period with the application of tax incentives for small companies, whether said incentives come from that same tax period in which the entity meets the requirements to be considered as small as if they came from a previous one.
Regulation: Articles 48.3 and 48.4 LIS
Requirements
In order to apply this special regime, entities must meet the following requirements:
- The number of homes rented or offered for lease by the entity in each tax period must at all times be equal to or greater than eight. In this sense, it is recalled that according to the provisions of article 48.1 of the LIS, with regard to the ownership of homes, it is required that the homes have been built, promoted or acquired by the company, so the homes that are available under any other legal title, such as usufruct, temporary right of exploitation or leasing, they may not be included in the calculation of the number of homes rented or offered for rent by the entity.
- The homes must remain rented or offered for lease for at least three years, the term of which will be computed:
- In the case of homes that appear in the assets of the entity before the moment of benefiting from the regime, from the start date of the tax period in which the option for the regime is communicated, provided that on said date the home was rented. Otherwise, the provisions of letter b) below will apply.
- If the homes have been subsequently acquired or promoted by the entity, from the date on which they were first rented by it.
Failure to comply with this requirement will result in the loss of the bonus that would have corresponded to each home. In this case, the entity must enter, together with the Corporation Tax fee corresponding to the tax period in which the non-compliance occurred, the amount of the bonuses applied in all the tax periods in which this would have been applicable. special regime, without prejudice to late payment interest, surcharges and sanctions that may be appropriate. However, it is considered that failure to comply with this requirement in a tax period does not prevent it from continuing to apply in subsequent tax periods, as long as the entity does not renounce the special regime, if all the requirements established for this are met.
- For each property acquired or promoted, the real estate promotion and leasing activities must be accounted for separately, with the breakdown necessary to know the income corresponding to each home, premises or independent registered property in that property be divided.
- In the case of entities that develop complementary activities to the main economic activity of housing rental, at least 55 percent of the income of the tax period, excluding those derived from the transfer of the leased properties once the minimum maintenance period of three years referred to in point two above has elapsed, or alternatively, at least 55 percent of the value of the entity’s assets must be capable of generating income that is entitled to application of the bonus provided for this special regime.
Regulation: Article 48.2 LIS
Bonuses
Bonus percentage
40 percent for tax periods beginning on or after January 1, 2022.
Subsidized income
Income derived from the rental of housing. The income to be subsidized derived from the lease will be made up for each home by the full income obtained, reduced by the tax-deductible expenses directly related to obtaining said income and by the part of the general expenses that correspond proportionally to said income.
In the case of homes that have been acquired under financial leasing contracts (Chapter
Bonus Basis
The part of the full amount of the Tax that corresponds to the income derived from the rental of homes that meet the requirements of article 48 of the LIS.
Incompatibility
This bonus, in relation to the subsidized income, is incompatible with the application of the capitalization reserve.
Dividends charged to subsidized income
In the case of dividends or shares in profits distributed from the income to which this bonus has been applied, the exemption provided for in article 21 of the LIS to avoid double taxation of dividends will apply to 50 percent of your amount. Such dividends or participation in profits will not be subject to elimination when the entity is taxed under the tax consolidation regime. For these purposes, the first distributed benefit will be considered to come from unsubsidized income.
Transfer of shares of entities covered by the special regime
The general rules of Corporate Tax will apply to the income obtained from the transfer of shares in the capital of entities that have applied the special regime. However, if the application of article 21 of the LIS applies, the part of the income that corresponds to reserves from subsidized undistributed profits will be entitled to the exemption provided therein on 50 percent of said reserves. Such income will not be subject to elimination when the transfer corresponds to an internal operation within a tax group.
Regulation: Article 49 LIS
Incompatibilities with the special regime
There may be two situations in which it is incompatible to access this tax regime:
If any other special tax regime applies to the entity, except for tax consolidation, tax transparency and mergers, divisions, contributions of assets, exchange of securities and financial leasing, it will not be possible to opt for the regime of the housing leasing entities, since the other special regime prevails over the latter.
On the other hand, if the housing rental company meets the requirements to be considered a small company, no regime prevails over the other, and the taxpayer may choose one or the other.
What requirements must be met for inclusion in the tax regime?
In order to request inclusion in this regime, a series of requirements must be met:
Have as the main corporate purpose in the statutes the rental of homes located in Spanish territory.
That the activity be considered economic activity. For this, the General Directorate of Taxes requires that there be a person with a full-time employment contract.
Have a number equal to or greater than eight homes. They must remain leased or offered for lease for a minimum period of three years. This period will be computed from the moment the application for this special tax regime is requested if the home is already rented or, if it was not rented, from the date of the first rental.
This regime is not incompatible with the leasing of business premises or even with the transfer of homes as long as they have been leased or offered for lease for a minimum of three years.
Account for the income and expenses of each of the properties separately.
Failure to comply with any of the requirements mentioned above will cause the Company to lose the possibility of applying the bonus. If the non-compliance arises from not having had the home rented or offered for lease for three years, the bonus will be withdrawn in respect of that particular home. However, if the non-compliance comes from the accounting without proper separation between properties, the loss will be total.
In the event that the company carries out other activities, this regime may only be applied when the income from housing rental exceeds 55% of the total income and the bonus will only be applied with respect to the housing rental activity. So, in the event that the rest of the activities represent a percentage greater than 45%, the company will not have the right to apply any bonus.
What bonuses does the special regime have?
If we meet the requirements that we have listed above, we will obtain a tax advantage: the bonus on the tax rate from the income derived from the rental of homes. This bonus was 85% of the general tax rate until 2021, resulting in a tax rate of 3.75%. However, as of January 1, 2022, this bonus has been reduced to 40% of the general tax rate, settling at 15%.
Although this special regime has lost a lot of attractiveness as a result of this tax modification, we must remember that the general corporate tax rate is 25%, so the application of this special regime represents a saving of 10% of taxation on income from the rental of housing.
Whoever wishes to benefit from this special regime must expressly notify the Tax Agency, after the competent company body takes the necessary agreement. The same will happen when we decide to renounce the aforementioned regime.
This is why these types of companies make sense when we are talking about large volumes of properties, where the overall amount of income that can qualify for the bonus is really significant.
In addition, these entities can enjoy a super-reduced VAT rate of 4% on the purchase of homes intended for this activity, instead of the usual 10% on the purchase of this type of property. This has a direct positive financial impact, since being normally subject to VAT pro rata and not being able to deduct input VAT (remember housing rental is exempt from VAT), an additional saving of 6% is produced in this way.
One of the problems that this regime has been experiencing 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 will only be able to apply the exemption for double taxation (currently 95%) 50% of these incomes, which makes this regime not so attractive if recurring dividend distributions are foreseen, rather than reinvesting.
In the case of natural person partners, the dividend received by them must be integrated 100% into their personal income tax, as savings income, as with any other company.
Our recommendation is to study each case individually to choose the best option, we can help you At Tax Law Zavala & Moscoso
