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V2474-17 3 October 2017 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IVA · subarrendamiento

Subletting residential properties for tourist use may be VAT exempt and classified as income from movable capital

A taxpayer has requested clarification regarding VAT liability, income tax classification, and expense deductibility for the subletting of residential properties for tourist rentals. The Directorate General for Taxes (DGT) has ruled that subletting is exempt from VAT provided it does not include hospitality services, and that the income is classified as income from movable capital unless hotel industry services are provided.

The question raised

Liability for Value Added Tax, classification of income for Personal Income Tax purposes, deductibility of the aforementioned expenses, and subjection to withholding.

The DGT's ruling

The subletting of residential properties is exempt from VAT provided that the lessee is not a business entity and no complementary services characteristic of the hotel industry are provided. The income obtained is considered returns on movable capital, unless there is an organization of means that constitutes an economic activity (such as accommodation with services). The expenses necessary to obtain said returns are deductible. The Personal Income Tax (IRPF) withholding applies only if the payer is a withholding agent and the legal exceptions do not apply.

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