Almost 65% of landlords in Spain could benefit from the 100% reduction in personal income tax that would free them from paying taxes on rental income, and the design of which the Government is working to finalize. The head of the Executive, Pedro Sánchez, aimed at decongesting the market and promoting access—particularly for young people—to . One of them is a total exemption from income tax on the returns obtained by owners who rent their properties and follow the limits of the Reference Price Index developed by the Ministry of Housing, which are substantially lower than market prices. . Although the details of the measure are still in the initial phase, the scheme being handled invites the majority of rentiers to participate, since the initial loss of income would be compensated by the subsequent tax reduction.
According to projections made by the union of technicians of the Ministry of Finance, Gestha, it would pay off for almost two out of every three landlords to stick to the official index, with average savings of between 67 and 347 euros per year. To reach these conclusions, which must be taken with caution because the fine print of the future bonus is still unknown, Gestha has analyzed the data collected in the annual personal income tax statistics published by the Tax Agency (and which show the average rental returns that each section obtains) and the figures from the INE family budget surveys.
As a result of them, it is expected that the nearly 350,000 landlords with a total income of between 12,000 and 21,000 euros per year will save 67.65 euros per year if they comply with the rent reduction requirement. For their part, another 357,000 landlords (in this case with income between 21,000 and 30,000 euros) would stop paying 184.47 euros to the Treasury, while the 687,000 landlords who obtain between 30,000 and 60,000 euros per year would save 347.23 euros . In total, there would be almost 1.4 million owners.
Gestha’s preliminary calculations also conclude that the 466,000 landlords with total personal income tax income brackets of less than 12,000 euros would not be interested in limiting their income by not obtaining any subsequent benefit, mainly due to the fact that they do not pay taxes and do not have to present the statement.
They would also not have any net incentive, since they usually rent more expensive houses and the bonus would not exceed the amount of the reduction. According to data from the Tax Agency, in the range between 60,000 and 150,000 euros of annual income there are almost 238,000 landlords who, if they benefit from the 100% exemption, would lose 540 euros per year. In the upper income brackets there are many fewer owners – just over 50,000 – who would stop earning up to 13,800 euros in the most extreme cases.
All these assumptions, Gestha states, have been calculated for a person in an individual declaration, without personal or family burdens. Furthermore, reductions in the tax base (such as contributions to pension plans or others) or tax deductions to which taxpayers are usually entitled are not contemplated. For the year, the tax scale of the general taxable base is the state scale, without considering the regional personal scales and minimums. Therefore, the savings amounts could be modulated upwards or downwards depending on the final wording of the rule, which could also veto the tax benefit for certain profiles of landlords.
Although the measure proposed by the Government has yet to be finalized, the tax credits that have been put on the table are reminiscent of the reductions that were already promoted in the housing law. This regulation, which allowed the autonomous communities to declare stressed market areas, contemplated a range of discounts to stimulate rentals at affordable prices. To begin with, the general reduction in personal income tax that all landlords can benefit from, from 60%, dropped to 50% with the law, and could be increased to a maximum of 90% in the event that landlords reduced the rent at least 5% compared to the last contract. However, for the owners to be able to benefit from them, it is essential that the regional governments declare the area as tense, because the rest of the communities, governed mostly by the PP, block the rule. This proposal aims to overcome this paralysis, so the new bonus will operate throughout Spain and will have a notable impact on the Treasury, the amount of which, according to the Executive, has not yet been calculated.
