Leasing companies may use group employees to prove economic activity

The classification of a real estate leasing activity as an economic activity is a determining factor for accessing tax benefits, especially regarding Wealth Tax (Impuesto sobre el Patrimonio). The Dirección General de Tributos (DGT) has recently addressed the possibility of this personnel requirement being met indirectly within a group structure.

What the DGT has ruled

For the leasing of real estate to be considered an economic activity, regulations require the employment of at least one person under a full-time employment contract. However, the binding ruling establishes that this requirement may be understood as met if the leasing entity is part of a business group with economic activity and the management of the leases is carried out through means centralized in other companies within the group.

For this interpretation to be valid, the Administration requires two fundamental conditions to be met:

• Unity of means and activity: There must be a real integration of resources at the group level.
• Functional integration: The leasing company must be functionally integrated into the group's activity.

The Administration warns that the assessment of these facts will be carried out individually in each specific case.

What this means for you

This resolution has a direct impact on two profiles:

• Companies that lease real estate: Those that are part of a business group and centralize their operating means in other companies within the same group.
• Natural persons: Holders of shares in leasing companies seeking to apply the exemption provided for in Article 4.Eight.Two of Law 19/1991 on Wealth Tax.

The possibility of proving economic activity through the group structure allows the leasing company to not need its own staff of employees, provided that the organization of means is effective and centralized.

What should be done

Since the Administration will assess the reality of functional integration in each case, it is necessary to document the existence of the unity of means and the centralization of management within the group. The correct structuring of shared services and the justification of operational integration are key elements to prevent the Administration from dismissing the consideration of economic activity.