RETURNS ON REAL ESTATE CAPITAL
1 . What is considered “earnings on real estate capital” ?
Income from real estate capital is considered to be derived from the leasing of rural and urban properties, as well as income derived from the constitution or transfer of rights or power of use or enjoyment of rural or urban properties.
The amount received from the acquirer, assignee, lessee or sub-lessee, included in the corresponding to all those assets assigned with the property and excluding VAT or, where appropriate, IGIC.
2 . How is the net return on real estate capital determined?
The net return will be the result of subtracting tax-deductible expenses from the full returns on real estate capital.
The scheme to determine and quantify the income that is finally included in the tax base is as follows :
Returns on Real Estate Capital.
Full returns ( -) Deductible expenses (=) Net return (-) Reductions (=) Reduced net return on Real Estate Capital.
3 . What expenses are deductible ?
The expenses that can be subtracted from the full income to determine the net income are those necessary to obtain them, including the amortization of the real estate.
Any expense that can be accredited as necessary to obtain income must be considered deductible from the income obtained.
On the contrary, they are not deductible in any case:
- Payments made due to claims (for example a fire) that give rise to decreases in the value of the taxpayer ‘s assets. In these cases, the treatment of capital gains and losses is applicable.
- Those that are not directly related to income (for example, those from renting a house by the landlord to be closer to his work).
- The net returns may be negative, but the deductibility of interest and other financing expenses is limited.
- There is no maximum deductible limit for all expenses.
- Yes, there is a limit to the deductibility of the interests of the foreign capitals invested in the acquisition or improvement of the property or the real right and other financing expenses and, in addition, the deductibility of repair and conservation expenses is also limited. The excess not deducted can be deducted in the following 4 years.
Deduction of interest and other financing expenses, as well as repair and conservation expenses, is limited, at most, to the amount of the full income obtained from the transfer of each property or right (amount of the lease).
In other words, the total amount of the full income that the taxpayer could have is not added and then the limit is determined on that total amount, but, on the contrary, the limit must be quantified for each good or income-producing right.
This means that the net income cannot be negative due to the deduction of interest and repair or conservation expenses exclusively, but it can be negative due to the deduction of other expenses, whether or not they are linked to interest.
4. What reductions are applicable to net returns ?
It is possible to distinguish between a general reduction and special reductions.
a) Overall reduction
Net returns with a generation period of more than two years, as well as irregular ones, will be reduced by 30%, when, in both cases, they are charged in a single tax period (for example transfer rights or compensation received from the tenant for damage or damage to the property).
The amount of net income to which the reduction will be applied may not exceed 300,000 Euros per year.
b) Special reduction
In the cases of leasing of real estate intended for housing, the positive net yield will be reduced by 60 %. This reduction will only apply to income declared by the taxpayer.
Yield from leased real estate, the amounts allocated to the amortization of the real estate and the other assets transferred with it are considered a deductible expense, provided that they respond to its effective depreciation. However, amortization is considered to meet the effectiveness requirement (the expense is considered “good “) when, in each year, it does not exceed the result of applying 3% to the amortization base. Which is the greater value of the following two: the cost of acquisition or the cadastral value.
5. Withholdings on real estate capital yields
In general, 20% in 2015 and 19.5% as of July 12, 2015.
Withholding is not applied :
- When it comes to housing rental by companies for their employees.
- Rents paid by the tenant or to the same lessor do not exceed € 9,00 per year.
When the lessor is obliged to pay taxes under any of the headings of group 8 61 of the IAE and there is no zero quota, or for any other heading that authorizes the activity of leasing or sub – sweeping of urban real estate, and applying the rules to determine the fee established in the headings of the aforementioned group 861 to the cadastral value of the properties intended for lease or sublease, there is no zero fee (cadastral value of the properties greater than 601,012.10 euros).
Source: Spanish Tax Calculator