Special buy and hold tax regime in Spain - 85% deduction?!

[Celia Fernández]

Hi everyone,

I understand that in Spain there are significant tax breaks (a deduction of 85%) for companies which rent 8 or more apartments under a special regime. I see that at least 55% of the company's revenue must come from the rentals, and that they must be rented as 'long term rentals'. Does anyone have any experience with this special regime in practice? It almost seems too good to be true. What's the catch?

Has anyone thought of grouping their rental properties together to make use of this tax break?

Thanks in advance!

P.S: I'm investing in Valencia, so happy to discuss and connect with other investors!

- Celia

[Erwin Groenendijk]

@Celia Fernández @Paolo De Leon, this is true. As to for what I know this only applies to companies, or family offices (patrimonios) that are adding bit by bit more properties in their portfolio.

It indeed can give you a huge tax break, however, talking with somebody some weeks ago that just got 7 properties buying one of our apartments in Valencia, he was also getting worried - with COVID the government (not sure if that was only in Cataluña or for the whole of Spain) is lowering the conditions the # of properties you need to own to be seen as a 'gran tenedor'. This was 30 in the past, brought down to 15 some time ago, and with COVID brought down to 10 if I am not mistaking. 

Now, this looks good at first but have in mind that with being a gran tenedor the Spanish government decided that their tenants should be allowed to only be paying 50% of the rents and having 2 options - 1 being that the tenants don't have to pay back this other 50% at all, or 2 that they pay it back in an instalment plan (or 3 hoping that your tenants will not say anything of course). 

You probably noticed that the government created quite a strong picture among all inhabitants that everybody should be almost 'in their right' of not paying rent when they had a difficult situation. A lot of people felt encouraged by these messages and a lot also made use of this (when it wasn't necessary) as a discussion point to the landlords for not paying rent or having the right the get a discount (otherwise you are not a good landlord giving discounts like all the others). Some stories of people even stopped paying completely, because they knew that nobody could kick them out during COVID. Also a lot of tenants knew to find their way in the registers to find out if their landlords were a gran tenedor or not, as (to my surprise) this can be found publicly and easily searching for it.

So, yes, huge advantages and also things to have in mind. 

Regards to both!