IRPF reduction if you are renting your property in Spain.
If you have your own property in Spain or you want to buy one to rent it, find out here how to pay less on your annual tax return. According to the tax authorities, the reduction for renting in the Personal Income Tax Law is 60%. It is calculated on the positive net return obtained for renting a property.
In other words, according to José María Salcedo, Partner in Atico Legal, the net return is the result of deducting from the income obtained by the rent, all the expenses according to the Personal Income Tax Law, provided that they are related to the property (repair and maintenance costs, taxes such as IBI and rubbish, insurance, professional rental services, and even electricity and water if they are at the owner’s expense).
Can all landlords enjoy the reduction in income tax for rent?
The answer is no. Not all landlords have the right to apply the reduction. In order to benefit from this reduction, it is necessary that the rented property is used as the dwelling of the person renting (tenant). In other words, if the property is rented by a company, as an office or as a business, the landlord could not apply the reduction in their annual tax return.
In addition, it is necessary that the income obtained is taxed as income from the real estate capital and not as an economic activity. In order to consider it as an economic activity, there must be at least one person employed under a full-time employment contract.
So, is it profitable to buy for rent in Spain?
Definitely yes! The rental housing market is constantly booming, with prices increasing every year and rates of return close to 10% for holiday rentals. In addition, the access to the finance to buy a home is quite easy and inexpensive, with fixed rate mortgages below 3% .
So, if you want to buy a property to rent in Spain, in addition to knowing that it is a profitable business, you also know that you can enjoy a 60% reduction in your income tax. What are you waiting for? Take a look here at our most profitable beach properties to rent.