In Madrid the Tax Authority has started to demand payment of the Property Transfer Tax and Documented Legal Acts on home rentals that, despite being payable since 1993, had not been enforced by the administration as it did not have the necessary technical resources.

This tax, in which the taxpayer is the tenant, had previously been applied to the acquisition of existing houses, but had been overlooked by the Tax Agency in the case of house rentals. However, the Tax Agency is now demanding payment of this tax in Madrid, and it is even doing so retroactively according to media reports.

In this context, it is important to note that if the tenant of a house in Madrid fails to pay this tax, the lessor will become subsidiarily liable in accordance with article 9.1 (b) of the law regulating this tax: “Persons who would be subsidiarily liable to payment of the tax: (b) In constituting rentals, the lessor, if the latter has received the first instalment of rent without requiring equal proof of payment from the tenant”.

For greater clarity, note that this tax must be paid within 30 business days of signing the rental agreement and a single payment shall cover the entire duration of the agreement.

To conclude, note that this tax applies solely to house rentals and not for rentals for any other purposes, such as commercial premises, offices or professional firms, since non-residential rentals are subject to VAT, which is incompatible with Transfer Tax.