Tuesday, October 19

The Housing Law will cut the tax privileges of large landlords in half


The new Housing Law will include a cut in the tax advantages of Housing Rental Entities, which will see their exemptions in Corporation Tax drastically reduced from the current 85% to 40%.

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In this way, these large homeowners will pay for the measures provided for in the future Law to reduce the tax burden of small owners, according to sources from United Podemos. In addition, the rental price will be limited by law.

The new legislation is still in the drafting phase and is expected to leave the Council of Ministers, to begin its parliamentary processing, in the final stretch of the year.

The agreement between Unidos Podemos and the PSOE, according to the aforementioned sources, will reduce the exemptions of the Housing Rental Entities to 40%. This figure currently covers companies that own more than eight homes, which place them on the market for long-term rentals (at least three years).

Since 2014, thanks to a measure approved by the Government of Mariano Rajoy, this type of large owners could sign up a bonus of up to 85% in the share of their Corporation Tax, which will now be reduced by almost half.

With this measure, the tax incentives provided for in the new Housing Law for small owners will be paid, which will allow lower rents, already affected by the freezing in stressed areas, according to sources from United We Can.

Price reduction in stressed areas

The future Law seeks, among other measures, to reduce rental prices in so-called stressed areas, in which rental prices are under upward pressure. In them, the implementation of benchmark indices is pursued to limit increases.

An index model that is yet to be designed, since the Government partners have been given a period of 18 months, since the approval of the Law, to decide how this figure will be structured.

Regarding the definition of stressed area, as explained by sources from the Executive, they will be those in which rental prices advance five points above the CPI in recent years and where the effort to pay them is more than 30% of the household income.

The validity of the declaration of territorial scope, as a stressed residential market area, will be three years, although it may be subsequently extended annually.

A definition that will not be effective immediately in the areas where these criteria are met, since it will be the Autonomous Communities -which have transferred the competencies of Housing- that have to request their application. At the moment, and although the Law has not yet been approved, CCAA governed by the PP, such as Madrid, have already advanced that they are not going to apply this measure.

Regarding the definition of large holders, the text agreed by the coalition government includes legal entities that own more than 10 homes and who will have to lower rental prices according to these benchmarks. These prices will apply both to new contracts to the same tenant and to a different tenant.

Regarding the tax measures for private owners, the Law contemplates upwards bonuses in personal income tax, of up to 70%, for owners who assign the rental of a home to a Public Administration; or 60% in the case of a rehabilitated home. Also, up to 90% when a new contract is signed in a stressed residential market area, with a drop of at least 5% on the rent of the previous contract.



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