Community of owners: What are their tax obligations?

Barely a week ago, new announcements were made regarding the tax obligations of owners’ communities and how they have changed over the last five years. The number of formalities have risen by 20%, making the correct administration of the building a much more complicated affair.

Included among these new formalities is the energy efficiency certificate, an indication of the tendency in the property sector to move towards increased sustainability and environmental protection. Other new procedures include the electrical inspections, new telematic notifications, the Tax Authority 347 Form and the subvention requests, as reported by the Professional Association of Property Administrators of Madrid (CAFMadrid) at the beginning of the month.

Since many people have the same questions about the tax obligations of buildings, Gestilar wants to help you make sure you do not forget any of these compulsory procedures. What are they?

VAT related tax obligations

Generally speaking, the VAT obligations are related to the electricity bills, the lift maintenance, cleaning and hiring of sub-contractor services.

In concrete terms, if the community performs any other type of economic activity, such as the rental of the roof to install an aerial, or displaying an advertising hoarding on the building front, it will be liable to pay VAT. If this is the case, it must submit a VAT declaration and pay the VAT collected for the services rendered, although it may claim a deduction for any services or work paid for in order to provide the services such as those described above.

However, homes owned by the community rented out to private persons for use as their main residence are exempt from VAT, as is the entrance/concierge office.

Personal income tax related obligations

Since 2014, communities of owners are also required to present the Tax Authority Form 347, on which the community must declare any business dealings it may have had with third parties (transactions with suppliers, purchase of goods or provision of services), for amounts over 3,005.06 euros.

This must be reflected in the annual accounts, be presented in February of the current year and contain the financial data from the previous year.

Likewise, if the community hires the services of independent professionals such as an administrator, a lawyer or architect, it must also withhold the corresponding tax.

There are a few exceptions for Communities of owners

A number of exceptions are allowed under current legislation. These are transactions that are exempt from declaration, all of which involve utilities or shared services:

• Electricity, fuel and water supplies.
• Insurance policies covering assets and rights relating to elements under common ownership.