Companies outsourcing real estate management are not guaranteed economic activity status

The classification of real estate lease management as an economic activity is a critical point for determining the taxable base in Corporate Income Tax (IS). Recently, the Directorate General of Taxes (DGT) has clarified the limits of this concept in a case where subsidiary companies outsourced the management of their real estate assets.

What the DGT has ruled

The inquiry focuses on determining whether the outsourcing of lease management by entities allows them to be considered as performing an economic activity under the Corporate Income Tax Law (LIS). The Administration's criteria indicate that, for the leasing of real estate to be classified as an economic activity, regulations require the existence of an organizational structure that includes, at least, the use of one person employed with an employment contract and full-time hours.

Although outsourcing management to third parties could, in theory, fulfill the need to hire own personnel, the DGT warns that this is not automatic. The Administration maintains the power to assess whether the complexity of the management entrusted to the external company truly justifies such outsourcing so that it can be considered an economic activity inherent to the company.

What it means for you

If your company manages real estate assets through the outsourcing of administration services or rental management, you must be aware that the mere existence of these contracts with third parties does not constitute definitive proof of economic activity. The Tax Administration will analyze the reality of the operation and the entity's structure.

The risk lies in the fact that, if the Administration considers that the management is minimal or that the outsourcing does not reflect a true organizational structure of the company, it could reject the classification of economic activity, affecting the application of Corporate Income Tax regulations.

What should be done

It is necessary to evaluate the operational structure of companies whose main purpose is the leasing of real estate. It is fundamental to analyze whether the external management is sufficiently robust and complex to sustain the classification of economic activity in the event of an inspection. Each situation requires a technical analysis of the management contracts and the entity's internal organization to determine its adequacy to Law 27/2014.