Wednesday 1 February 2017


Sometimes, the housing tenant is not a natural person, but a legal entity, which rents the housing for its employees.

In this case, two questions arise:

  • if the lessor benefits from the reduction by 60% of the rental income, as it is the general rule in housing lease;
  • if the aforementioned housing lease is VAT free.

INCOME TAX REDUCTION - In a recent Resolution, the Spanish Central Economic and Administrative Court has stated that, in such cases, the lessor may also apply the 60% reduction to rental income, since the law does not expressly require the tenant to be a natural person to benefit from the reduction.

VAT EXEMPTION - As far as the VAT exemption is concerned, the Spanish Central Economic and Administrative Court considers that the aforementioned lease will not be exempted from VAT, in general terms. In fact, VAT Act requires the tenant to be the one who occupies the real estate, to make the deduction possible (Art. 20.23 of VAT Act). Actually, if the housing is rented by a legal entity, we are in presence of a sublease (instead of a lease).

However, if the rental contract mentioned the name of both the tenant and the sublesee, the VAT exemption would be applicable.

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