If your company owns rental properties, you may be missing out on one of the most powerful corporate tax reliefs: the special housing rental scheme, which allows you to reduce the tax payable on rental income by 40%.
However, the key is to meet the requirements and exercise the option in time. For example, if your financial year coincides with the calendar year, you still have time to apply it to your 2026 corporation tax… provided you notify the authorities before the end of this year.
The main requirements
The company must meet the following conditions:
- The rented property must be the home dwelling of the tenant.
- Have at least eight properties rented or offered for rent throughout the financial year (yes, those that were available for rent but were not successfully let also count).
- Keep these properties rented for at least three years. If you sell before then, you must return the tax relief applied to that property. Therefore, this tax relief covers long-term rentals but not holiday rentals.
- Account for the income and expenses of each property separately, in order to determine the portion of profit attributable to each one.
- Prove that renting is the company’s main activity, which is fulfilled if:
- at least 55% of the profits come from subsidised rentals, or
- at the end of the financial year, at least 55% of the company’s assets are properties (valued for accounting purposes).
- Have a full-time employee so that the rental is considered an economic activity.
Below you will find an example of tax payments with and without this tax relief applied:
| Concept | applying this tax scheme | without applying this tax scheme |
|---|---|---|
| Corporate tax base | 150,000 | 150,000 |
| Gross tax liability 25% | 37,500 | 37,500 |
| Tax relief | –15,000 | – |
| Tax to be paid | 22,500 | 37,500 |
Individual shareholders? Much better
The scheme is particularly attractive when the shareholders are individuals who pay income tax. Why? Because if the investment is made through another company, the tax advantage is diluted.
Specifically, companies that receive dividends from other companies usually receive a 95% tax relief. However, if the investee company benefits from this special scheme, the tax relief is reduced to 50%. Furthermore, if you then wish to distribute dividends to yourself, you will have to pay tax on the dividends received in your Personal Income Tax. This means that, if you want to optimise your tax situation, the most efficient thing to do is to collect the dividends directly from the leasing company without involving another company.
Conclusion
Many real estate companies are missing out on tax savings of 40% simply because they are unaware of this option or fail to plan ahead. The special regime for long-term house rentals is not a trick or a loophole: it is a legitimate tool that rewards professionalisation in the rental market. Ignoring it is tantamount to giving money away to the Spanish Tax Office. In a context where every margin point counts, meeting the requirements and taking advantage of the scheme can make the difference between a company that optimises its tax structure and one that resigns itself to paying more. The question is not whether you can apply it, but whether you can afford not to.
At Spence Clarke, we will be happy to verify whether your business model is eligible for this special scheme and, if so, to comply with the legal requirements for its application.
