90% reduction in rent in stressed areas: application criteria

The application of tax incentives for residential rentals in stressed housing market areas has raised doubts regarding their duration and the continuity of the benefit. The Dirección General de Tributos (DGT) has issued a ruling that defines the necessary conditions to access the 90% reduction provided for in current regulations.

What the DGT has resolved

The inquiry concerned whether the 90% reduction applied only to the first year of the contract or throughout its entire term, and what would happen if the area lost its status as a stressed area. The body has determined the following:

• Duration of the benefit: The 90% reduction is applicable throughout the entire duration of the new contract, provided that the required requirements are maintained.
• Formalization conditions: To access this type of reduction, it is mandatory to formalize a new contract in a stressed housing market area, establishing an initial rent that is at least 5% lower than the last rent of the previous contract.
• Loss of stressed area status: If the property is no longer located in an area declared as a stressed housing market area, the taxpayer will lose the right to the 90% reduction. In that scenario, the general 50% reduction could be applied where appropriate.

What it means for you

If you are the owner of a property in an area declared as a stressed housing market, the 90% reduction in Personal Income Tax (IRPF) is not a single-year benefit, but can be extended as long as the requirements of Law 12/2023 and Law 35/2006 are met. However, the stability of this tax benefit depends directly on the classification of the geographic area and the management of the lease agreements.

What you should do

It is necessary to verify that the rent agreed upon in the new contract strictly complies with the requirement of being lower than the previous rent to ensure access to the reduced rate. Likewise, the situation of the residential area must be monitored, as a change in the area's declaration will directly affect the tax burden you must bear for the rental of your property. Each contractual situation must be analyzed to confirm that the requirements are met at the time of signing and during the term of the contract.