Tax benefits for property rental companies

Buy to let properties

If you own several properties in Spain and let them long term, it could be tax beneficial for you to form a company to manage the rentals.

There are significant deductions on the usual income tax rate. For example, qualifying companies pay 15% instead of 25%. 

In this article, we explain taxation on property rental companies in Spain. 

Read our free guide to long-term rentals in Spain

What sort of rental properties qualify?

You can only benefit from a reduced income tax rate if the rental properties are let long-term. In other words, they are the tenants’ principal homes.

You can also include furniture, a storage room and up to two parking spaces in the rental, but they must be let in conjunction with the dwelling. 

What conditions must the company fulfill?

To qualify for the reduced income tax rate, the company must: 

  • Own and manage at least eight properties during the tax years. 
  • Have the properties available on the long-term rental market for at least three years. 
  • Earn at least 55% of its income from rental properties. 
  • Keep separate accounts for each property. 

General conditions for the rental activity 

Under the provisions of Spanish company law 27/2014, a property rental company may only benefit from reduced tax rates if it meets the following requirements: 

  • The company must employ at least one person full-time. 
  • The company’s principal economic activity must be the long-term rental of properties in Spain that it owns or has developed. 
  • The company may not sell the rental properties until it has owned and managed them for at least three years.  

Find out more about long-term rentals in Spain

Benefits for qualifying rental property companies 

In 2022, the Spanish tax authorities introduced several advantages for companies owning and managing rentals. They include: 

  • An allowance of 40%, is applied to the company’s base tax obligations on rental income. 
  • A reduction in the general tax rate from 25% to 15%. 
  • A reduction in the VAT (IVA) payable on the purchase of new homes. Instead of the regular rate of 10%, property rental companies pay only 4%. 

Get expert assistance and expert on company taxation in Spain

How can you benefit from this special tax regime? 

Your company may choose to adopt this tax regime and if you do, you must inform the Spanish tax authorities of the decision. Tax benefits apply to the tax year after the authorities receive your notification. 

How do you set up a property rental company?

If you’d like help with setting up a company in Spain and with taxation matters, please get in touch with our legal team. Their expertise will save you time, money and stress and allow you to make the most of tax deductions.

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