What is it Real Estate Leasing and Economic Activity?
Leasing real estate in Spain may seem like a hard task. One of the most important things to understand is how the current economic activity will affect the process.
When is the rental of real estate considered an economic activity?
A personal income tax requires you and your space to be classified based on many factors of the reasoning behind the lease.
1. The classification of personal income tax is the biggest issue by having the implications of determining the net return on a property tax, reduction in Inheritance and gift tax, and the rate applicable to small companies.
2. To classify the rental activity of real estate, at least one premises must exclusively intend for the management of the activity are provided for the development of the activity. At least one person must be employed on a full-time basis on a contract of employment is used for the organization of the contract.
3. The Directorate General for Taxation (DGT) states that the use of the premises must be exclusive and there must be absolute physical separation if it is shared with third parties or if other economic activities are carried out there. It also states that the person employed must provide the services related to the management of the leasing activity itself.
4. The DGT will reject you if you are/have:
- Property administrators (for being professionals who do not have an employment contract)
- A specialized company
- One of the co-proprietors in the cases of the community of goods
- Employees of urban properties (since the person must provide services related to the management of the rental activity itself, not to surveillance and maintenance)
- Cleaning personnel
- Two part-time employees (the law requires full-time employment)
- And directors of companies with senior management employment contracts who perform only the company’s management, administration and representation activities in that capacity.
5. The DGT does state, however, that the employee is: a member of the family unit and the sole director of a company with a full-time employment contract.
6. The social security contribution scheme does not conclude that. In the case of an employment contract, the requirement must be deemed to have been met.
7. The purpose of the Personal Income Tax Law (LIRPF) provision is to establish minimum requirements for the rental of real estate to be considered as a business activity.
8. The Audiencia Nacional, the Tribunal Económico Administrativo Central (TEAC) says that the purpose of the LIRPF provision is to establish minimum requirements for the rental of buildings to be considered as an economic activity, but these are not always adequate.
9. The TEAC currently believes that the existence of economic activity in the lease of real estate could be appreciated even if it were not for the existence of economic activity.
The complications that arise between property leasing and economic activity may seem extremely overwhelming and complex. We at Lexidy Law Boutique are here to calm your nerves. Our multi-lingual team can help you understand any questions or concerns you might have.