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A company established in 2016 with non-resident shareholders manages 9 rental properties generating approximately €70,000 annually in revenue, without any full-time employee. The DGT concludes there is no economic activity for corporate tax purposes as it fails to meet the requirement under Article 5.1 of the LIS: rental property activity only constitutes economic activity when at least one full-time employee is employed under a labour contract, and the scale of the business does not justify outsourcing.
Question posed: Whether the real estate leasing activity carried out with the described means can be qualified as an economic activity for Corporate Income Tax purposes, given the scale of the activity to be developed by the applicant and the volume and importance of its income.
For the leasing of real estate to constitute an economic activity for Corporate Income Tax purposes, it is mandatory to employ at least one person under a full-time employment contract. The absence of this requirement prevents the management from being qualified as an economic activity, even if real estate management is subcontracted. In this case, the scale and income of the entity do not justify subcontracting as opposed to the obligation to hire own personnel.
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