If you have a company with rented properties and you are wondering whether you can apply for exemption from wealth tax, this circular is of great interest to you. When is a leasing company considered to have real economic activity?
In a tax world that is increasingly full of nuances and loopholes, it is sometimes comforting to find a clear answer that, without beating around the bush, lets you know where you stand. Well, if you have shares in a company dedicated to property leasing, and that company has hired a full-time person to manage the activity, you may be on the right side of the rule.
The Directorate General of Taxes (DGT) in its CV V0259-25 has resolved a query that, far from being an isolated case, covers a common doubt: Is it possible to apply the exemption from Wealth Tax (IP) if the only employee who manages the rentals also carries out other professional activities on her own behalf or for other companies?
The answer is yes, and this is not a generous concession, but rather a recognition of the reality of many small businesses: what matters is not the “exclusivity” of the worker, but their full and effective dedication during the contracted working hours. Whether they then work as an administrator in another company or invoice as a freelancer in their free time is irrelevant for tax purposes, if they fulfill their working hours at the leasing company.
Why does this matter?
Because Law 19/1991 on Wealth Tax (specifically, Article 4.Eight.Two) establishes that partners may be exempt from tax on their shares in the company if it meets a series of requirements. And the first requirement, which often frustrates taxpayers, is that the entity must have a real “economic activity.”
But when is there economic activity in a company that rents apartments or offices? According to the Income Tax Law (Art. 27.2), when there is at least one person employed on a full-time contract, dedicated to managing and organizing the leases.
However, here was the catch: what if that employee also has other jobs or projects outside of working hours? Is the exemption lost?
Binding consultation V0259/2025 (March 5, 2025) clears up the doubt emphatically: no. The key is that the contract is an employment contract, the working hours are full-time, and effective dedication is guaranteed during that time. The rest is private (or professional) life unrelated to tax criteria.
Pay attention to this!
- It is not enough to have a contract signed: the full working day must actually be completed.
- The tasks must be focused on rental management, not on unrelated ancillary or administrative tasks.
- The other requirements must also be met minimum participation (5% direct or 20% with family) and management functions with sufficient remuneration.
What can you do if you have a similar structure?
- Review the employment contracts of those who manage the properties: is it full-time? Are those hours being worked?
- Avoid confusion: if the person hired also works as a freelancer or for another company, they should do so outside of their working hours with you.
- Keep good records: in the event of an inspection, it will be essential to demonstrate the reality of the work and that there are sufficient material and human resources.
- Check whether you meet the other requirements for exemption, because one alone is not enough.
For further information, please consult Tax Advice.
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