If you own a commercial space, home, or any type of property jointly with others and want to rent it out, forming a “community of property” (Comunidad de Bienes) is an effective and straightforward way to do so.
In this guide, we explain step by step what a Co-ownership is, how to set it up, and how its taxation works.
What is a joint ownership?
Is a type of business partnership under Spanish law, in which two or more individuals jointly own and manage an asset—typically a property—with the goal of generating income, such as through rentals. It’s a simple legal structure that does not require a minimum capital investment and is often used when co-owners want to rent out a shared property.
Advantages of a for Renting Out Property
- Allows rental management through a single entity. All operations related to the property can be centralized, making coordination easier.
- Simplifies invoicing and tax compliance. A joint ownership can issue invoices and handle VAT and withholding tax obligations more efficiently.
- No minimum capital or complex incorporation required. It’s a straightforward structure that doesn’t need a notary or large initial investment.
- Ideal for leasing commercial premises or offices. Especially useful when VAT and withholding taxes must be managed.
How can a joint ownership be formed?
- Partnership agreement (Contrato de constitución): Include the name of the entity, the names of all partners (comuneros), purpose (e.g. property rental), registered address, contributed assets, ownership percentages, and internal rules.
- Settle the Property Transfer Tax (ITP): Although this step is mostly a formality (as most contributions are exempt), the formation must be reported to the tax authority.
- Request a Tax Identification Number (NIF) for the joint ownership from the Spanish Tax Agency (Agencia Tributaria).
- Register as a landlord by filing form 036 or 037 with the Tax Agency, in order to declare rental income and comply with VAT or withholding obligations if applicable.
Not all partners (comuneros) are required to register as self-employed (autónomos).
Taxation of a joint ownership as a Rental Entity
It will depend on the use of the property:
If a commercial property (non-residential use) is rented out:
- The Comunidad de Bienes issues invoices including VAT and, if applicable, withholding tax on personal income (IRPF).
- It must file quarterly VAT returns using form 303 and an annual summary with form 390.
- Rental income and withholdings are allocated among partners according to their ownership shares through form 184.
- Each partner reports their share on their personal income tax return (IRPF) or corporate tax return (IS), as appropriate.
If a residential property is rented out:
- The rental income is exempt from VAT and no withholding tax applies.
- It is not mandatory to formalize the joint ownership if the property is already under a condominium arrangement.
- Each owner reports their proportional share of income and expenses on their personal income tax return (IRPF).
Joint ownership as tenants and as landlords
If the joint ownership rents a commercial property for its activity
- It must pay the withholding tax on behalf of the landlord.
- It must pay the corresponding VAT.
Is a joint ownership suitable for your situation?
If you are looking for a simple and legal way to manage shared rentals, joint ownership can be the solution. Especially for leases with tax obligations such as VAT or personal income tax (IRPF), it helps you centralize management and comply with regulations.
If you need assistance with the creation, management, and taxation of your joint ownership, you can contact our experts for joint ownership advisory services.
