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income tax

  • 2025 Income Tax Campaign: Updates on Housing

    2025 Income Tax Campaign: Updates on Housing

    April is here, and with it comes one of the most important times of the year for many: filing income tax returns. This year’s campaign begins on April 2nd and ends on June 30th for those submitting through the Renta WEB platform.

    This year, the Spanish Tax Agency has introduced a few updates, including the possibility of making payments via Bizum, a move aimed at streamlining and simplifying the process. Other notable changes affect the real estate sector, which plays a key role in this tax season due to various deductions related to housing and rental properties.

    Deductions for Energy Efficiency Improvements in Housing

    These deductions aim to encourage energy efficiency upgrades across Spain’s housing stock, which, according to the Green Building Council España (GBCE), is in poor condition—over 80% of homes have an energy rating of E, F, or G.

    These deductions apply only to owners of primary residences or properties intended for rental—and in the latter case, the home must be rented out before December 31st, 2025, to be eligible.

    – Deductions for works that reduce heating and cooling demand. Taxpayers can deduct up to 20%, provided the works result in at least a 7% reduction in heating and cooling demand. The work must have been carried out between October 6th, 2021, and December 31st, 2024, with a limit of €5,000.

    – Deduction for works that reduce the consumption of non-renewable primary energy. A minimum 30% reduction in non-renewable primary energy consumption is required, or alternatively, the property must achieve an A or B energy rating. Eligible upgrades—such as replacing windows or installing solar panels—must be done on a primary residence or a property intended for rental, with a 40% deduction available and a maximum cap of €7,500. These works must also have been completed between October 6th, 2021, and December 31st, 2024.

    – Deduction for energy rehabilitation of residential buildings. This deduction applies only to upgrades carried out on entire buildings primarily used as residences. A deduction of up to 60% is possible, with a limit of €5,000 per year, and up to €15,000 per dwelling. The project must result in at least a 30% reduction in non-renewable primary energy consumption or an upgrade to energy class A or B.

    It’s important to note that these deductions are not compatible with one another, and all must be certified with energy efficiency reports issued before and after the work is completed.

    Deductions for Rental Income

    Another major change this year involves new rates for deductions on rental income, which were updated in January 2024. These apply to income derived from renting out properties and are particularly relevant to rentals of primary residences.

    – Deduction on rental income from properties used as the tenant’s primary residence. Starting in 2024, new reduction percentages have been introduced for positive rental income from properties intended to be the tenant’s main residence, ranging from 50% up to 90%, depending on certain conditions.

    90% deduction applies to landlords who reduce rent by at least 5% compared to the previous contract in designated stressed rental markets.

    70% deduction applies if the property is rented in a stressed area to young tenants between 18 and 35 years old and it’s the first time the property has been rented. If this requirement is not met, the deduction can still apply if the tenant is a public administration or non-profit entity that houses vulnerable populations, or if the property is part of a public housing program with price controls.

    60% deduction applies if the property was renovated within two years before the rental contract was signed.

    50% deduction applies when none of the above conditions are met.

    To take advantage of these deductions, it may be helpful to check whether your property is located in a stressed rental area and if you qualify for regional tax deductions, which can also positively impact your income tax return.

    Regional Tax Deductions

    These deductions complement the national personal income tax (IRPF) benefits and vary depending on the taxpayer’s autonomous community.

    For energy efficiency investments, the Valencian Community and Murcia offer an additional 20%, while Galicia offers 15%, with an extra 5% available if renewable energy sources or climate control devices are used in the primary residence.

    For deductions on rent of primary residences, several regions also provide additional relief: Valencia and Andalusia offer 15%, Catalonia, Asturias, and Galicia offer 10%, La Rioja offers 20%, and Madrid leads with up to 30%.

  • Does the tax reform affect individual investors in real estate?

    Does the tax reform affect individual investors in real estate?

    In recent months, the tax reform approved by the Spanish government has sparked intense debate, affecting various areas of the economy, including real estate. The sector, which contributed almost 177 billion euros to Spain’s GDP according to the National Statistics Institute (INE), has faced significant uncertainty as these tax changes could negatively affect them, with a higher tax burden.

    In this context, the changes have raised concerns among small real estate investors, who are asking: What changes does this reform introduce? How will it affect their investments? And, most importantly, how can they continue to identify profitable opportunities in such a dynamic environment?

    Context: Key changes in the tax reform

    The proposed tax reform from November 2024 introduces several significant changes that impact the real estate market. According to the IEB, one of the most notable aspects is the modification of the taxation of listed real estate investment companies (socimis). Although it was proposed that socimis would be taxed at 15% on undistributed profits, this measure was not approved in Congress and the proposal to modify the tax regime of socimis was rejected during the tax reform process.

    However, the government recently announced its intention to limit the tax benefits for socimis that invest in housing, applying them only to those offering affordable rents. This fiscal adjustment will not apply to socimis operating in other sectors, such as commercial or logistics. Therefore, these types of socimis will continue to benefit from their special tax regime, which allows them to be taxed at 0% on corporate tax, as long as they meet certain requirements, such as distributing at least 80% of their profits in dividends.

    In this regard, Diego Sánchez de la Cruz, economic analyst, states that “ultimately, the taxation of residential socimis has been affected, in line with the government’s plans. This increase may impact small investors, who would lose access to a common investment vehicle in many developed economies, which in fact serves as a tool to finance the development of new housing.” Furthermore, he points out that “the most harmful measures for the real estate sector had been negotiated with Sumar and did not succeed in the final agreement. The shadow of legal uncertainty remains and is weighing on the sector’s performance.”

    Implications for individual investors

    For small investors, these changes have relevant implications that must be taken into account when planning new operations or managing existing ones.

    First, the reform introduces an increase in the taxation of capital gains from the sale of properties. This means that when selling a property, the investor will need to allocate a higher percentage of their profits to taxes. Therefore, it will be crucial to conduct a more thorough analysis of the expected net return before making any transaction.

    On the other hand, the reduction of the property transfer tax (ITP) for young investors represents a great opportunity for those who meet the requirements. This measure not only reduces the initial acquisition cost but also improves the long-term performance of investments. If you are under 40 years old and are considering buying a property, this could be the ideal time to take the plunge.

    Regarding the overall impact of these measures on the promotion of new construction, Sánchez de la Cruz points out that “there have been no changes that will significantly relaunch the development of new construction. The key to substantially increasing new construction promotion lies in mobilizing land and reducing bureaucratic hurdles, as well as the timelines for urban planning processing, so it is up to regional governments to break away from the current paradigm.”

    The reform also includes incentives related to energy efficiency and housing rehabilitation. According to Royal Decree 9/2024, deductions for investments in heating, air conditioning, and energy consumption reduction in homes have been extended until December 31, 2025. Additionally, until December 31, 2026, deductions for energy rehabilitation apply.

    In this sense, the expert acknowledges that “these measures are welcome, but their impact has been very limited so far, as they are part of a broader context in which too many measures have been adopted that increase the tax burden on taxpayers and businesses to which this incentive is now offered.”

    Key points for declaring investments with Urbanitae

    Understanding the fiscal impact of these reforms on our investments is crucial. In this regard, these changes seem not to affect how investments in real estate crowdfunding platforms like Urbanitae are taxed, but with the 2024 tax season just around the corner, it is important to consider how to declare the profits obtained from this type of investment:

    First, the profits obtained through Urbanitae are considered capital gains and are taxed under personal income tax (IRPF) within the savings base, with tax rates ranging from 19% to 26%, depending on the amount obtained. If you sell your shares before 12 months, the earnings are included in the general IRPF base, which could result in a higher tax rate.

    As for any dividends you may receive from the projects, they must also be declared as income from movable capital. These are taxed within the savings base at rates ranging from 19% to 23%, depending on the total income.

    If any of the projects have not generated the expected profits, you can offset the losses with other capital gains, thus reducing your taxable base. Additionally, if you cannot offset the loss in the same fiscal year, you can carry it forward to future years.

    Finally, Urbanitae will provide you with all the necessary documentation, such as profitability reports and earnings, to make the process easier. If you have any doubts, it is advisable to seek advice from a tax expert to ensure that your declaration is correctly filed.

  • How Urbanitae investments are taxed in 2026

    How Urbanitae investments are taxed in 2026

    Updated content for the 2025 income tax campaign, which runs from April 8 to June 30, 2026.

    One of the most frequent questions among Urbanitae investors has to do with taxation: what taxes must be paid on the profits earned from projects and how they are reflected in the tax return.

    The short answer is that it depends on several factors. A natural person is not taxed in the same way as a legal entity, nor does a debt project work in exactly the same way as an equity one. It is also important to distinguish between two concepts that are often confused: withholding tax and final taxation.

    In most cases, if you invest as an individual resident in Spain, the returns obtained through Urbanitae are included in the savings tax base of personal income tax (IRPF), and many payments are subject to a 19% withholding tax. But that does not necessarily mean your final tax burden will remain at that percentage.

    Withholding tax and taxation: they are not the same thing

    This is the first point worth clarifying.

    When a company pays interest or distributes profits, it may apply a withholding tax on account. This withholding is an advance payment of the tax that is later settled in the income tax return.

    For example, if you are entitled to receive 100 euros in profit and a 19% withholding tax is applied, you will receive 81 euros net, and the remaining 19 euros will be paid to the Spanish tax authorities on your behalf. Later, when you file your tax return, those returns will be added to your savings tax base and it will be checked whether that withholding already covered the tax due or whether you still have to pay something more. The general 19% withholding tax on this type of income is provided for in tax regulations.

    That is why, even though in many cases part of the tax has already been paid in advance, final taxation depends on your overall tax situation.

    How Urbanitae investments are taxed if you are an individual

    If you invest as an individual with tax residence in Spain, the usual situation is that the returns obtained through Urbanitae are taxed under personal income tax (IRPF), within the savings tax base.

    Debt projects: interest is taxed

    In debt projects, the return received by the investor takes the form of interest. This interest is taxed as income from movable capital.

    The logic is simple: if you invest 1,000 euros and recover 1,100 euros, the 1,000 euros of principal is not taxed; what is taxed is the 100 euros of interest. A 19% withholding tax will normally be applied to that return.

    Equity projects: distributed profits are generally taxed

    In equity projects, the investor participates in the capital of an SPV and may receive profits when the project distributes results or is liquidated. In practice, when that return is structured as a dividend or profit share, it will generally also be taxed within the savings tax base of IRPF.

    Again, the general principle is the same: what is taxed is not the repayment of the capital contributed at nominal value, but the return generated by the investment.

    What tax rates apply in the savings tax base

    For the campaign corresponding to tax year 2025, filed between April 8 and June 30, 2026, the savings tax base is taxed on a progressive scale.

    The applicable rates are:

    • 19% up to 6,000 euros
    • 21% between 6,000 and 50,000 euros
    • 23% between 50,000 and 200,000 euros
    • 27% between 200,000 and 300,000 euros
    • 30% above 300,000 euros

    This means that the initial 19% withholding tax does not always match the final taxation. If during the year you have obtained more savings income — for example, interest, dividends or capital gains — part of it may end up being taxed at higher rates.

    What usually happens when filing the tax return

    In most cases, if the withholding tax has been correctly applied, that information already appears in the tax data or in the draft return.

    It may happen that the name shown does not exactly match the commercial name of the project, since the Spanish tax authorities usually show the paying company rather than the commercial name by which the investor identifies the transaction. Even so, the withholding will normally already have been correctly allocated, and you will only need to review the data before confirming the return.

    The important exception in equity: liquidation proceeds

    There is one exception worth knowing because it changes the tax treatment quite significantly.

    In some equity projects, the return to the investor may not be channelled as a dividend, but as liquidation proceeds. In those cases, no prior withholding tax may be applied, because in order to calculate the income correctly it is necessary to take into account the value and acquisition date of the investment.

    In practice, this means that if you invested, for example, 500 euros and upon liquidation of the company you receive 530 euros as liquidation proceeds, it is possible that nothing was withheld at the time of payment. In that case, you will have to report in your tax return the investment date, the amount invested, the repayment date and the amount received, so that the software can calculate the corresponding gain.

    This is not the most common scenario, but it is one of the ones that generates the most doubts precisely because it breaks with the usual logic of “they withheld the tax and everything already appears in the draft return.”

    What about wealth tax?

    In addition to IRPF, some taxpayers may be required to report their investments under wealth tax and, where applicable, under the temporary solidarity tax on large fortunes, which remains in force.

    In these cases, the investment in Urbanitae forms part of the taxpayer’s wealth like any other asset. What matters here is not so much a specific rule of the platform, but the general obligation to declare the assets and rights that make up one’s wealth when the legally established thresholds are exceeded.

    How legal entities are taxed

    If the investment is made through a company, then we are no longer dealing with IRPF, but with corporate income tax.

    As a general rule, the interest and profits obtained are included in the entity’s ordinary taxation. In addition, prior withholding tax may also apply to certain payments.

    The main particular feature appears in certain equity investments. When the legal requirements are met — including, in general terms, a holding of at least 5% — the participation exemption to avoid double taxation on dividends and profit shares may apply. That exemption is, as a general rule, 95%.

    Put simply: if a parent company holds a significant stake in another company that has already paid tax on its profits, the law avoids those same profits being fully taxed again when distributed up to the parent company.

    Is there tax deferral as with funds?

    No.

    Investments in Urbanitae do not benefit from the transfer regime applicable to certain investment funds. Therefore, when taxable income arises, that income must be declared in accordance with the general rules, without the tax deferral that may exist in other collective investment vehicles.

    What happens if you invest from outside Spain

    In the case of non-resident investors, taxation depends on the country of tax residence, the type of income obtained and the applicable double taxation treaty, if any. The rules of non-resident income tax provide for specific treatment, and their practical application may vary depending on the case.

    That is why it is best to avoid generalisations here: there is no single valid answer for all foreign investors. If you invest from outside Spain, the sensible approach is to review your specific situation with specialised tax advice.

    In summary

    If you invest in Urbanitae as an individual resident in Spain, the usual situation is that:

    • interest from debt projects is taxed within the savings tax base of IRPF;
    • distributed profits from equity projects are also generally included in that savings tax base;
    • many payments are subject to an initial 19% withholding tax;
    • and your final taxation depends on the total amount of your savings income during the tax year.

    It is also worth remembering three key ideas:

    • The first is that what is taxed is not the capital you recover, but the profit obtained.
    • The second is that withholding tax and final taxation are not the same thing.
    • And the third is that in some equity projects there may be payments without prior withholding tax, especially when the return is structured as liquidation proceeds, in which case it will need to be reported manually in the tax return.

    Final disclaimer

    This article is for information purposes only and does not constitute individual tax advice. The taxation of an investment may vary depending on the investor’s tax residence, financial situation, the type of income obtained and the specific structure of the transaction. If in doubt, it is advisable to consult a tax adviser before filing your return.