The imputation of income to personal income tax (IRPF) for properties that are not the owner’s habitual residence refers to the concept of taxing the mere ownership of a property that is neither rented nor the owner’s habitual residence. According to Spanish tax legislation, these properties are considered to be a source of imputed income, on the assumption that they generate a profit simply because they are available for use.
How is the imputed income calculated?
- Cadastral value: The basis for calculating imputed rent is the cadastral value of the property. You will find this value on the property tax bill (IBI).
- Applicable percentage: Generally, a percentage is applied to the cadastral value to determine the imputed rent. This percentage has varied in recent years. Traditionally, 2% of the cadastral value is used if it has been revised or changed in the 10 years prior to the declaration. Otherwise, the applicable percentage is 1.1%.
- Days of availability: The number of days during the year that the property was available for use should be taken into account. If the property was not available for the whole year, the imputation is prorated according to the days it was actually available.
Exceptions and exclusions
- Properties related to economic activities: Properties related to an economic activity carried out by the owner are not subject to imputation of property income in the IRPF.
- Rented property: If the property is rented and income is received for it, the income imputation does not apply.
- Special situations: There are certain situations where a property may be exempt from imputation, such as in cases of administratively declared ruin:
Declaration of ruin: If a property has been officially declared in ruin by the competent authorities, this may exempt it from income imputation. This is because the property is not fit for use or habitation, removing the presumption that it could generate any profit for the owner.
Properties affected by exceptional circumstances: Situations such as natural disasters (floods, earthquakes, serious fires) that affect the structure and utility of the property can be considered to exempt the imputation of rent, provided that these circumstances effectively prevent the use of the property.
Major works: If the property is subject to works that prevent it from being used for a prolonged period of time, it may not be subject to rent imputation for the duration of these works. It is necessary that the works significantly affect the habitability or use of the property.
Temporary expropriation: In cases where a property is subject to an expropriation process or is temporarily occupied by the public administration for a specific purpose, the property would not generate imputed rent for the duration of the expropriation.
Properties destined for protected rental markets: Some properties that are offered in rental programmes with special conditions, such as government-regulated prices or for specific sectors of the population, may have exemptions or special conditions regarding the imputation of rents.
These situations generally require appropriate documentation and justification to be provided to the tax authorities in order to be recognised and accepted in the personal income tax return. It is always advisable to consult a tax advisor to ensure proper compliance with current legislation and to avoid problems with the tax authorities.
The imputation of rental income ensures that owners pay tax on properties that are capable of generating income, even if they are not explicitly rented out. It is important to be aware of these obligations in order to avoid surprises when filing your income tax return.