What are the tax advantages to rent my property as permanent address?
We receive many queries from clients worried about their homes because of alarm in the media. We often hear debates and news in the media about squatters and the lack of rental accommodation. Because of this, clients often feel safer renting their properties to companies, as they believe they are a safer bet financially. However, renting a property to private individuals who are going to live there long-term offers two important benefits.
Firstly, there is the stability factor, as a long-term rental contract covers a longer period of time.
Secondly, there is a general reduction in personal income tax of 50% on the positive net income from the rental of a property that constitutes the tenant's main residence for contracts signed after 26 May 2023. Article 23 of the Personal Income Tax Act also provides for greater tax breaks in other conditions:
90% if, when signing a new lease, the amount of rent previously earnt is reduced by 5%, provided that the property is located in a stressed residential market area.
70% if the property is rented for the first time, is in a stressed residential market area and the tenant is between 18 and 35 years old.
70% if the tenant is a public authority or non-profit organization using the property as social housing or if the property is eligible for having an official rent cap established.
60% if the property has been renovated.
Unfortunately, to date no parts of the Balearics have been designated as “stressed residential market areas”, so the first two tax breaks (90% and 70%) do not apply.
All contracts signed before the enforcement of Law 12/2023 on housing rights will benefit from a reduction of 60% on the positive net yield of the rental of a property that constitutes the tenant's main residence.