Requirements for the 90% Personal Income Tax reduction for rentals in stressed areas

The application of tax benefits for owners of housing in stressed residential market areas requires strict compliance with specific conditions. A recent binding ruling from the Dirección General de Tributos (DGT) has clarified the scope of the reduction provided for in the IRPF regulations when a new lease agreement is formalized.

What the DGT has ruled

The inquiry focused on determining whether a taxpayer was entitled to the 90% reduction in the IRPF taxable base when entering into a new lease agreement while maintaining the same rent as the previous contract. The DGT has ruled that it is not possible to access this benefit if the rent reduction requirement is not met.

According to the Administration's criteria, for the reduction under article 23.2 a) of the Law 35/2006 (LIRPF) to be applicable, the new contract must meet two concurrent conditions:

• It must be formalized in a stressed residential market area.
• The initial rent of the new contract must be more than 5 percent lower than the last rent of the previous contract (after applying its update clause).

In the case analyzed, since the rent of the previous contract was maintained, the legal precept requiring a reduction in the lease amount was not satisfied.

What this means for you

If you are a homeowner and wish to benefit from this tax reduction, it is not enough for the property to be located in a stressed area. The regulations require a real economic incentive for the tenant through a decrease in the rental price. If the new lease agreement equals or exceeds the rent of the previous contract, the Administration will consider that the rent reduction requirement has not been met, thus losing the right to apply the tax benefit.

What you should do

It is necessary to verify the status of the area where the property is located and analyze the last applied rent, including its updates. Before formalizing a new contract, you must ensure that the proposed new rent complies with the reduction of more than 5 percent required by Law 12/2023 and the LIRPF. It is recommended to assess each contractual situation individually to ensure compliance with legal requirements.