If I let my child live rent-free in a flat I own, what do I have to pay the tax authorities?

Question

José Manuel Alburquerque · Accepted Answer

In your income tax return you will have to include as income an amount that the tax authorities attribute to flats that are neither their owner's principal residence nor let, even if they bring in nothing. It is 2 % of the flat's cadastral value a year, or 1,1 % in many municipalities. You cannot deduct any expenses. Your child does not have to declare anything for living there. If you charge them anything, however little, it is already a tenancy, with different rules. Deemed income from property (“imputación de rentas”) The tax authorities take the view that anyone who has a flat at their disposal obtains income from it, even if they receive nothing. That is why they impute to you, that is, count as your income, an amount calculated as follows: It is 2 % of the cadastral value, shown on the bill for the IBI, the local property tax. It is 1,1 % if the “Catastro”, the Spanish Cadastre, has carried out a general revaluation of the municipality's values in the years set by law. The tax data that the tax authorities provide for the income tax return show whether the flat's value has been revised. It is counted for the days of the year on which the flat has been in that situation and according to the share of the flat that you own. It is added to your salary, pension and other income and is taxed at your marginal rate, the rate on your last euros of income. You cannot deduct the IBI, the owners' association fees or repairs. For example, with a cadastral value of 120.000 euros you will be attributed 2.400 euros a year, or 1.320 at 1,1 %. If your last euros of income are taxed at 30 %, you will pay about 720 euros for it, or 396. Making sure it really is free Letting someone use the flat free of charge is not a tenancy, but the law presumes that anyone who lets someone else use an asset charges for it, unless the contrary is proved. It is advisable to be able to prove that it is free: Sign a document with your child stating that you are letting them have the flat free of charge and that they will give it back when you ask for it. It will also help you recover it if you need it. Your child should not pay you anything. The prudent course is for you to keep paying the flat's own expenses, such as the IBI or the owners' association fees, so that they cannot be seen as a price. If your child pays you rent, however low, it is a tenancy. You will have to declare it and, because it is your child, the law does not allow you to declare less than a minimum for that tenancy, which today is what the tax authorities would attribute to you if the flat were empty. What may change If the October 2026 decree is ratified by Parliament (“convalidación”), that is, if the “Congreso”, the lower house, confirms it, from 2027 the percentage will depend on the combined cadastral values of all the properties you have in this situation and will range from 1,1 % to 3 %, in bands. The minimum for lettings between relatives will also change. It is sometimes said that letting a child live somewhere for free amounts to giving them the use of the flat as a gift, with the corresponding tax. There is no known position of the Spanish tax authorities or of the “Agència Tributària de Catalunya”, the Catalan tax authority, that treats it in that way. Giving them the flat or its usufruct is another matter, as that is indeed a gift.