Evictions, personal income tax... The compensations and aid that reach landlords and tenants

MadridThe first housing decree –the anti-eviction decree– includes some measures that are accompanied by compensation and bonuses for landlords and tenants. In fact, this has been and is one of the points of contention in the negotiation with Junts, especially regarding aid to landlords. The economic report of the decree, to which ARA has had access, puts figures to the impact of some of these measures, while others are not quantified. Only between tax deductions and bonuses, the Ministry of Economy estimates a cost of 1.28 billion euros to the public coffers, as government sources have indicated to the ACN.

Evictions

In view of the temporary suspension of some evictions, the competent administration –the autonomous communities– must compensate the owner when they are a natural person (a private individual) or a legal entity (company) dedicated to affordable or social housing. The communities must assume the rent that the owner ceases to collect during the suspension of the eviction and the unpaid supplies (water or electricity) when applicable. If it is not assumed, interest will be generated. However, "the suspension or compensation will not mean the disappearance of the obligation [for the tenant] to keep up to date with the rent". The debt does not disappear either.

What happens to the debt?

In parallel, the regulation includes a change to the criminal procedure law which contemplates that in case of non-payment of rent, when the landlord is a natural person and the tenant is a person in economic vulnerability, the autonomous community will take charge of the debt, although it will later be paid by the State.

Specifically, if within a period of two months a housing alternative has not been offered, an enervation of the debt is contemplated (this measure has a structural character). When it is settled, the eviction process is stopped and the tenant can remain in the apartment.

If after two months the debt has not been paid, the autonomous community will occupy the debtor position of the tenant (the eviction continues not to take place). The State will compensate the autonomous communities, except for the interest generated by the debt if they pay late.

None of the measures are quantified.

PIT

The decree contemplates personal income tax (IRPF) deductions for owners with apartments in tense zones. On one hand, for the income that the owner (individual) obtains from the rent if they renew the contract or apply a rent reduction. For example, when a new contract is signed, if it is a small owner (10 properties or fewer) and a rent reduction of at least 5% is applied with respect to the previous contract, the deduction can reach 100%. Different circumstances come into play, such as the age of the tenant. In this case, the impact on public coffers is not quantified.

At the same time, it increases deductions when contracts signed before May 2023 enter into a tacit renewal (the contract is renewed) or for energy rehabilitation. The Treasury estimates that it will stop receiving 370 million euros due to deductions on returns from renting an apartment (they can increase from 60% in the IRPF to 80%).

In contrast, it contemplates an increase in personal income tax (IRPF) collection (deductions decrease) for the signing of some new contracts from December 1, 2026, that include a rent increase. Here, the Treasury has only made an estimate of the collection for the first month of application: 37 million euros (impact of the first month).

Regarding tenants, a personal income tax (IRPF) deduction for the habitual residence is proposed if it is declared a tense zone. The deduction is 10% of the rent paid, with a limit on the amount of the rent, and it decreases based on income (it applies if one earns less than 33,007 euros). The Tax Agency calculates that the deduction will reach 945,000 tenants who would save about 835 million euros in their tax returns for the rent they pay.

Empty dwellings

The Spanish government extends the 1.1% tax rate on personal income tax (IRPF) for empty homes. The measure affects about 2.36 million income tax returns and the collection impact is around 154 million euros. Municipalities are also allowed to apply surcharges on the property tax (IBI) for empty properties. The cost is not quantified because the measure depends on whether the apartment is in a stressed area.

Tourist VAT

The package of measures includes a 10% VAT on those properties that are offered as tourist apartments. This VAT, which can only be applied in stressed areas, will have a tax collection impact of 170 million euros per year.

Sale of properties

Given the difficulties in increasing supply rapidly, tax deductions on personal income tax (IRPF) are being considered for profits from the sale of an apartment when it is sold to a public entity.

The measure will be in effect from the entry into force of the decree until December 31, 2027. The property must have been vacant for at least two years, and the deductions could reach 100% of the capital gain in the event that the sale is for a maximum of 200,000 euros. They will be reduced up to a maximum sale price of 800,000 euros. The estimated impact is 93.9 million for the public coffers.

For example: an apartment is bought for 120,000 euros, sold for 200,000 euros, and the capital gain is 80,000 euros. If the conditions are met, the gain will not be taxed under personal income tax (IRPF).

Other measures

Increasing the tax on Socimi profits from 15% to 25% will result in a collection of 1.2 million euros. However, the deductions that these types of companies can claim total 3 million.

The reduced VAT for renovation and repair works on rental properties will result in a cost of 103.5 million euros per year. VAT is also reduced to 4% for social housing, a measure with an impact of 121.2 million euros.