Skip to content
Back to index
V1565-18 6 June 2018 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · retención

Companies must withhold income tax and VAT applies if the end user is not specified in the lease agreement

A property owner inquired whether she must apply income tax (IRPF) withholding and if leasing her property to a company for its administrator's use is subject to VAT. The Directorate-General for Taxes (DGT) ruled that income tax withholding is mandatory and that VAT applicability depends on whether the end user is identified in the contract.

The question raised

Whether the lessee company is obliged to apply withholding tax on the income paid and the taxation of said lease under Value Added Tax.

The DGT's ruling

Regarding Personal Income Tax (IRPF), the company must apply withholding tax because the employee housing exception does not apply due to the absence of an employment relationship. Regarding VAT, the lease is exempt only if it is proven that the lessee does not intend to exploit the asset and the specific natural person who will occupy the dwelling is designated in the contract, prohibiting assignment to third parties. If the contract allows the lessee to subsequently designate occupants, the transaction shall be subject to VAT and not exempt.

Book your free first meeting