What is imputed income?

The imputation of income to personal income tax (IRPF) for properties that are not the owner's habitual residence refers to the taxation of the mere ownership of a property that is neither rented nor the owner's main home.

Under Spanish tax legislation, these properties are considered to be a source of imputed income on the assumption that they generate a benefit simply because they are available for use.

How is imputed income calculated?

The calculation is based on several elements.

1. Cadastral value

The basis for calculating imputed income is the cadastral value of the property.

You can usually find this value on the property tax bill, known as IBI.

2. Applicable percentage

A percentage is applied to the cadastral value to determine the imputed income.

As a general rule, the percentage is 1.1% where the cadastral value has been revised or modified in the previous 10 years.

Otherwise, the percentage is usually 2%.

3. Days of availability

The number of days during the year that the property was available for use should also 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

Some properties or periods may be excluded from imputed income.

Properties related to economic activities

Properties related to an economic activity carried out by the owner are not normally subject to imputation of property income in IRPF for the period in which they are genuinely used for that activity.

Rented property

If the property is rented and rental income is received, imputed income does not apply to the rented days.

Instead, the rental income is declared under the relevant rental income rules.

Special situations

There are certain situations where a property may be exempt from imputation, provided that the circumstances are properly documented.

• Declaration of ruin: if a property has been officially declared in ruin by the competent authorities, this may exempt it from income imputation because the property is not fit for use or habitation.
• Exceptional circumstances: natural disasters such as floods, earthquakes or serious fires may be relevant if they effectively prevent the use of the property.
• Major works: if the property is subject to works that prevent use for a prolonged period, imputed income may not apply for the period of non-use.
• Temporary expropriation: if the property is temporarily occupied or affected by public administration action, it may not generate imputed income during that period.
• Protected rental programmes: some properties offered under specific regulated rental programmes may have special treatment depending on the rules of the programme.

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 avoid problems with the tax authorities.

Final takeaway

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.