My tenant does not pay me, how does it affect me in the 2022 Income Statement?
The owner or usufructuary of a rental home must include the income obtained in the Income Statement each year. This year, from April to June, you must carry out this procedure -mandatory for all taxpayers- regarding your activity in 2022. Specifically, the Tax Agency establishes that, in general, they are real estate capital returns.
The tax treatment is different if, for the rental of the home, the taxpayer has, at least, an employee with a full-time employment contract. Then, rental income is included as income from economic activities. In any of the above cases, the returns will be included in the general tax base, whose tax rate ranges between 19% and 47%.
However, the situation is complicated when the taxpayer you don’t get the income you should because the tenant doesn’t pay the rent. In those cases, the owner would have to declare for income that he has not received. How should you proceed? Do you have to pay personal income tax even if you don’t get paid?
Article 23 of the Law on Personal Income Tax (IRPF) includes deductible expenses and reductions for determining net income and includes, among others, the expenses necessary to obtain the returns. The regulations consider as such “doubtful balances under the conditions established by law”.
On this issue, Royal Decree 439/2007 specifies when they can be considered Doubtful balances: “provided it is sufficiently justified”. To do this, he points out two situations. In the first place, the Treasury will recognize as a deductible debt when it’s been more than six months between the first collection process and the end of the tax period. In the case of Income, the tax period ends on December 31 of each year. The regulations add that this will apply if “a credit renewal had not taken place”.
For example, if the tenant stopped paying the rental income in November, it will not be possible to deduct the amount of the debt in the 2022 return –it is presented from April 2023-. However, if the owner continues without payment for at least six months, the amount It will be deductible in the next Income Statement. In this example, in 2023, which will be presented a year later.
It is not necessary to wait for 6 months without collecting rent to consider doubtful balances if the tenant is in bankruptcy situation. It is a judicial procedure -which can be requested by the debtor himself- with the objective that a person -physical or legal- in a situation of insolvency face his debts.
Tax once collected
If the owner resorts to this deduction, once the tenant’s debt is resolved, must declare the collection as income in the year that occurs. However, in the event that the tenant’s debt could not be deducted because he did not meet the requirements, the taxpayer will not have to declare when he collects the debts because the Treasury understands that he has already complied.