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V0530-18 26 February 2018 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IVA · arrendamiento de negocio

Leasing of a rural tourism business is subject to 21% VAT and requires 19% Income Tax withholding

A rural house owner seeks clarification on the VAT and Income Tax (IRPF) applicable when leasing her business to third parties. The Directorate-General for Taxes (DGT) determines that the leasing of a business is subject to VAT at the standard rate and that the income is classified as income from movable capital, subject to withholding tax.

The question raised

Taxation under Value Added Tax, applicable tax rate. Taxation under Personal Income Tax, applicable withholding rate.

The DGT's ruling

The leasing of a rural house business operation constitutes a provision of services subject to VAT at the general rate of 21%, as it is not a residential exemption but a transfer for business activity. For Personal Income Tax (IRPF), income from the leasing of businesses is considered income from movable capital. Lessees must apply a withholding tax of 19% on the amounts paid.

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