Calculation of the 90% tax reduction for rentals in stressed housing zones

The application of the 90% reduction in Personal Income Tax (IRPF) for landlords of housing in stressed residential market zones requires compliance with specific requirements regarding the rent amount. The Dirección General de Tributos (DGT) has issued a decisive criterion to determine the basis upon which the reduction required by current regulations must be calculated.

What the DGT has ruled

The query concerned whether the calculation of the 5% rent reduction should be based on the initial amount of the previous contract or the last amount following annual updates. The DGT has ruled that the initial rent of the new contract must be more than 5% lower than the last rent of the previous contract.

This calculation should not be performed based on the price at which the previous lease began, but rather on the last lease amount after having applied the annual update clause (such as the CPI), if one existed in the previous contract. The requirements for this reduction must be met at the time the new contract is signed and maintained throughout its entire duration.

What this means for you

If you are the owner of a property located in an area declared as a stressed residential market and wish to benefit from the 90% reduction in IRPF, you must take special care with the transition between contracts. It is not enough to lower the price compared to the start of the previous contract; the reduction must be real compared to the last rent received, including agreed updates.

This criterion directly affects the planning of your rental income and the correct application of Law 12/2023 and Law 35/2006 (LIRPF). An error in calculating this 5% margin could invalidate the right to the tax reduction during an inspection.

What you should do

Before formalizing a new lease agreement with the aim of applying this tax benefit, it is necessary to:

• Verify the last rent received from the previous tenant, including any applied CPI updates.
• Calculate that the proposed new rent is, in effect, more than 5% lower than that amount.
• Ensure that the reduction conditions are maintained throughout the entire duration of the new contract.
• Assess each contractual situation individually to guarantee compliance with the regulations.