Author:
Miriam Sánchez González
Reduction in personal income tax for renting an apartment to students
The TSJ of Galicia allows the application of the reduction in the IRPF for the lease of an apartment to students for 10 months a year.
As is well known, the Personal Income Tax regulations establish a reduction (article 23.2 of the Personal Income Tax Law) applicable in the income tax return of the lessor who rents a property as a habitual residence. This reduction, in general terms, will be 50% of the positive return for contracts entered into as from January 1, 2024, and may be 90% or 70% if the property is located in the stressed residential market or 60% in the case of refurbishment. It should be noted that for contracts entered into before January 2024 the reduction will be 60%.
This reduction only applies to leases of real estate that are destined to habitual residence, not being able to be applied to the rents of tourist apartments since its purpose is not to satisfy a permanent need of housing but to cover a need of temporary character.
Case under discussion
In the case in question, it is disputed whether or not the reduction provided for in article 23.2 of the Personal Income Tax Law is applicable to the lease of two apartments located in Santiago de Compostela that were rented to students traveling to that city. Specifically, these properties were rented during the months of September to June (ten months) coinciding with the duration of the school year. It should be noted that some of the tenants were tenants for more than one school year.
What criteria does the administration follow for the application of the reduction?
According to the tax administration, the rental planned for the school year constituted a seasonal rental, and the tax benefit, the reduction provided for in the regulation, would seek to increase the supply of leased properties and promote the rental of residential use, as opposed to tourism or vacancy. In other words, the tax administration is making the application of this reduction provided for in Article 23.2 of the Personal Income Tax Law subject to occupation for a period of time rather than to the purpose provided for in the wording of the rule itself, which is its use as a “habitual residence”.
What does the TSJ of Galicia say about it?
The TSJ chamber considers that it is not necessary for the contract to be subject to a certain period of time for the tax benefit provided for in article 23.2 of the Personal Income Tax Law to be applicable, the only requirement being that the property be rented as a dwelling with respect to the lessees.
The TSJ rejects the criterion followed by the Tax Administration “because in fact the LIRPF does not expressly refer us to the LAU (Urban Leases Law) for the interpretation of article 23.2; and, on the other hand, because, in the opinion of this Chamber, the fact that the lease has been temporarily limited in the year does not prevent that during the period in which it was leased it will be used for the housing needs of the lessees”.
In its interpretation, the TSJ also considers the successive reforms made to the rule, including the most recent one made by Law 12/2023, of May 24 for the right to housing, whose purposes include “facilitating access to decent and adequate housing to people who have difficulties in accessing housing under market conditions, paying special attention to young people and vulnerable groups and favoring the existence of an offer at affordable prices and adapted to the realities of urban and rural areas”. Something that, according to the TSJ, would be “closely linked to the purpose pursued by Law 46/2002, by introducing the tax benefit that the appellant wishes to take advantage of, to increase the supply of rented housing and reduce the price of rents, promoting the rental of properties for residential use, as opposed to their tourist use or their vacancy”.
However, we must point out that this judgment of the TSJ of Galicia is not final, since it can be appealed before the Supreme Court.
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