Other details in relation to the concept of returns

1. Leasing of real estate as a return on real estate capital

   Regulations: Art. 27.2 Law Income Tax

   The income derived from the leasing of real estate is considered as income from real estate capital, unless the leasing is carried out as an economic activity.

   For these purposes, it is understood that the leasing of real estate is carried out as an economic activity only when at least one person employed with a full-time employment contract is used to organise it.

   In order for the income derived from rent to be classified as income from real estate capital, the rent must be limited to the mere provision of a property for periods of time, without being accompanied by the provision of services typical of the hotel industry, such as: periodic cleaning services, linen changes, catering, leisure or other similar services. If it is accompanied by this type of complementary services we are dealing with a business activity and the income derived from it will be considered as income from economic activities, in accordance with the provisions of article 27.1 of the Income Tax Law.

   Consequently, if services typical of the hotel industry are provided by the lessor, we are dealing with income derived from economic activities and if such services are not provided are dealing with income from real estate capital, unless the circumstances provided for in article 27.2 of the Income Tax Law occur (that is, if a person with an employment contract and full-time workday is available to carry out the activity), in which case, the income derived from the lease will also be considered income from economic activities.

2. Sublease

   Regulations: Art. 25.4.c) Law Income Tax

   In the case of subleases, the amounts received by the sublessor are considered income from movable capital .

   However, the participation of the owner or usufructuary of the property in the sublease price is considered as real estate capital gains , without it being necessary to apply the reduction for leasing of real estate used as housing to the net income, established in article 23.2 of the Personal Income Tax Law , which is discussed later.

3. Leasing of businesses or mines

   Regulations: Art. 25.4.c) Law Income Tax

   Amounts received from business or mine leases are considered tax-related as returns on movable capital .

   However, if the lease is only for a business premises , the returns obtained must be classified as from real estate capital and quantified by applying the rules discussed in this Chapter.

   The distinction between leasing a business premises and leasing a business is discussed in Chapter 5 .

4. Compensation for early termination of the lease agreement

   The compensation paid as a result of the early termination of the lease agreement is considered by the owner-lessor as an improvement and not as a deductible expense for determining the net return on real estate capital. For the tenant who receives it, it constitutes a capital gain whose generation period will be the one corresponding to the length of the lease contract.

5. Property with simultaneous use or purpose in the same period (leased and available to its owners)

   When a property is subject to different successive or simultaneous uses in the same tax period, that is, rented for part of the year and at the disposal of its owner for the rest, the income derived from the rent constitutes income from real estate capital and the income corresponding to the non-rented period or to the non-rented part is considered imputed income from the ownership of the property, provided that it does not become the taxpayer's habitual residence.

   The imputation of income from properties that have been, during the year, totally or partially, at the disposal of their owners or usufructuaries is discussed in Chapter 10.

   The amount of the yields and imputed income will be determined in proportion to the number of days that the properties have been rented or unrented, respectively, during the fiscal year.

6. The leasing of common elements of a building

   The leasing of common elements of a building, such as part of the façade or the roof, by the community of owners gives rise to returns on real estate capital that will be attributed to the co-owners according to their participation in the community.

   The regime for attributing income obtained by certain entities, including property owners' associations, in Chapter 10.