Let’s say a taxpayer owns a property that he rents out on a room-by-room basis, under individual contracts, granting exclusive use of a room while common areas are shared. The question is whether the reduction provided for permanent residential leases under Article 23.2 of the Personal Income Tax Law can be applied.
In the Binding Ruling V2457-25, the Directorate-General for Taxation (DGT), considering that the income obtained from the aforementioned leases qualifies as real estate income (and not as an economic activity), clarifies this issue.
It should be remembered that, following the reform introduced by Law 12/2023, Article 23.2 LIRPF provides for different reduction percentages (90%, 70%, 60% and 50% as the standard case) depending on whether a series of conditions are met.
In its ruling, the DGT concludes that renting on a room-by-room basis does not in itself prevent the application of the general 50% reduction, provided that the requirements for a lease of a habitual residence are met.
In this case, we can refer to the Urban Leases Act (LAU) in order to define residential leases, seasonal rentals being excluded. Consequently, the reduction will apply if:
- The rooms are used as residential in accordance with the LAU.
- Exclusive use is granted to specific individuals identified in the contract.
- It is evidenced that they constitute the tenants’ habitual residence.
The ruling adds that it must be possible to provide evidence showing that the arrangement is in fact a residential lease. Municipal residency registration (empadronamiento) is a relevant indication, but neither the only one nor an excluding factor. As always, assessment of the evidence will fall to the legal bodies responsible for inspecting this.
At PLANA VENTURA GARCÉS, we offer specialised advice on tax and real estate contract matters, and can address any issues and questions that may arise in relation to leases.
