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V1244-23 11 May 2023 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos del capital inmobiliario

Rental income without employees classified as real estate capital income, preventing Social Security deductions

A taxpayer inquired about the taxation of commercial and residential rental income without employing staff, specifically whether self-employed Social Security contributions could be deducted and which IAE headings applied. The DGT ruled that, as no employees are hired, the income is classified as real estate capital income rather than income from economic activities.

The question raised

Question posed: The taxpayer requests to know the classification for Personal Income Tax purposes of the income obtained from the rental of the premises and the dwelling, given that no person will be hired for the management of the rental. Likewise, the taxpayer requests to know whether the Social Security contributions paid are deductible. Finally, the taxpayer requests to know which heading they should register under in the Tax on Economic Activities for the rental of the premises and what the associated census obligations are.

The DGT's ruling

The leasing of real estate is only considered an economic activity if at least one person is employed under a full-time employment contract. As this requirement is not met, the income is classified as income from real estate capital. Consequently, Social Security contributions are not deductible as they are not necessary to obtain said income. Regarding the IAE, the taxpayer must register under headings 861.1 and 861.2 through a census declaration.

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