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Tax Obligations of a Community of Owners

Normally the Communities of Owners do not pursue any lucrative purpose, however, they are obliged to comply with certain requirements before the Tax Authorities:

V.A.T. (Value Added Tax).

If the Community of Owners carries out economic activities, it will be obliged to submit VAT on the income received from these activities. These activities include: the renting of common spaces, such as the rooftop for the placement of an antenna, or the façade for the placement of advertisements, or the renting of common premises. In these cases, the Community of Owners must issue the corresponding invoice and charge the tax.

On the other hand, the Community of Property Owners can deduct the input VAT payments that are directly related to the obtaining of the income. For example, the works to adapt the roof for the installation of the antenna, or the maintenance of the installations or repairs of the rented premises, as long as they are paid by the Community of Owners.

Housing owned by the Community, e.g. the caretaker's house, which is rented out to private individuals as their main residence, is exempt from VAT.

The Inland Revenue considers rental income in communities to be "Rendimientos de capital inmobiliario" because if it were considered "Rendimientos de actividades económicas" (income from economic activities) it would require the payment of IRPF (personal income tax) and other more complex obligations.

VAT must be filed quarterly by means of form 303 and annually by means of form 390.

As the Community of Owners does not have legal personality, if it receives income of more than €3,000 per year, it must also file form 184 and allocate this income proportionally among the owners of the Community according to their participation coefficient.

Form 347 (Annual Declaration of Transactions with Third Parties)

Royal Decree 828/2013 determines the obligation of the Community of Owners under the horizontal property regime to file the declaration of transactions with third parties (347).

If the Community of Owners does not carry out business or professional activities, but it does carry out transactions with third parties that exceed €3005.06 during the financial year, it will be obliged to file form 347. In this case, transactions corresponding to the purchase of electricity or fuel supplies used for communal consumption, water supplies, or insurance for the purpose of insuring property in common areas and elements must not be declared. Operations corresponding to maintenance and conservation, works, administration expenses, cleaning, etc. must be declared. This obligation has existed since January 2014. The declaration must be presented in February, declaring the operations of third parties corresponding to the previous year and which exceed 3005.06 €.

If the Community of Owners carries out business or professional activities, it will include in form 347, in addition to the operations mentioned in the previous section, all those related to the development of the business activity.

Personal Income Tax (I.R.P.F.)

If the Community has contracted employees (caretaker, maintenance staff, lifeguard, gardener...) it is obliged to make the corresponding withholding in the payroll and pay it to the Tax Authorities.

If the Community hires the services of independent professionals (administrator, lawyer, architect...) it must also make the corresponding withholding on the amount of the invoice to be paid to these professionals for their services.

There is no obligation to withhold tax for services that do not have the status of professional (plumbing, electricity, masonry, purchase of products or goods, etc.). However, there are some exceptions in which it is compulsory to make a withholding of 1% of the taxable base of the invoice of those self-employed workers (bricklayers, electricians, plumbers, etc.) who are under the objective assessment regime and who are contracted by the Community.

These withholdings must be declared and paid to the Tax Authorities on a quarterly basis by means of form 110 or 111. The Annual Summary of withholdings must also be presented by means of form 190.

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