Fiscal Implications of Spain's New Housing Decree

• The Spanish government has introduced a new Royal Decree to boost affordable housing supply and strengthen the social function of residential property.
• The fiscal package is estimated to result in an annual revenue shortfall of 1.859 billion euros for the state and regional governments.
• The measures address taxation for landlords, renters, tourism-focused properties, and corporate housing entities.

Tax Incentives and Deductions

• Non-large landlords can qualify for tax reductions of up to 100% on rental income by lowering prices or participating in social housing programs.
• Renters earning below 23,007 euros annually are eligible for a 10% income tax deduction, capped at 11,630 euros of annual rent paid.
• The deduction is restricted if the tenant or their household owns property within a 50-kilometer radius of the rental unit.

Tourism and Corporate Measures

• Holiday rentals offering hotel-like services are now subject to a 10% VAT, expected to generate 170 million euros annually.
• Real Estate Investment Trusts (SOCIMIs) face an increase in the special levy on undistributed rental profits from 15% to 25%, with potential reductions if they focus on affordable, long-term rentals.

Municipal Authority and Other Provisions

• Local governments are empowered to apply surcharges of up to 150% on the Property Tax (IBI) for empty homes and properties used for tourism in high-demand areas.
• The 10% VAT rate for repairs and renovations on long-term rental properties is extended to include corporate landlords, previously limited to individuals.
• Additional fiscal measures, including tax exemptions for public housing aid and lower rates for official protection housing (VPO), contribute to the overall projected reduction in public revenue.