When a home is rented, the owners must include the profits obtained from said operation in their income tax return, even if the tenants do not pay them. This has been confirmed by the Treasury in the Practical Income Manual 2025, in this way, landlords with inquiokupas (tenants who remain in the home without paying rent) must include these amounts in personal income tax despite not having received them.
This criterion is based on the personal income tax regulations, which establish that income from real estate capital (those derived from rentals that do not come from a professional activity) are attributed to the tax period in which they are payable, as stated in article 14.1.a) of the Personal Income Tax Law. That is, the Treasury applies the accrual criterion, in which what is relevant is not when it is collected, but when the right to collect arises.
In this sense, the manual specifies that “the amounts that the tenant must pay” constitute full income, which includes all the rents agreed in the contract. Therefore, even if the tenant does not pay, if the owner has the right to demand that payment, he must include it in his income tax return.
The rent must be declared even if it is not collected
The Tax Agency is clear in pointing out that non-payment does not eliminate the obligation to pay taxes. Even in cases where the landlord has initiated an eviction lawsuit for non-payment, the amounts owed continue to be considered a return on real estate capital.
However, it is worth clarifying that, although these amounts must be declared, they can later be deducted as a doubtful balance when certain requirements are met.
In fact, the manual includes the criteria of the Supreme Court, which establishes that these incomes must be attributed “to the tax period in which they are payable by the recipient,” even if they have not been collected. This reinforces the idea that personal income tax does not depend on actual income, but on the right to credit.
This criterion directly affects cases of squatting. Even if the owner does not receive income for months, if there is a contract in force and the rent is payable, he must still declare it in the personal income tax, which may entail an added tax burden.
The Treasury allows unpaid rents to be deducted as doubtful balances
Although owners are obliged to declare rent even if they have not collected it, personal income tax regulations also allow these amounts to be deducted as an expense in cases of doubtful balances.
In order to apply this deduction, some requirements must be met. Specifically, the Treasury allows unpaid rent to be considered as a doubtful balance when any of these situations occur:
- More than six months have passed since the first non-payment without the debt having been collected
- The tenant is in bankruptcy proceedings
- A judicial procedure has been initiated to claim the debt or the eviction
In these cases, the owner must first declare the income as a return on real estate capital, since it is payable, but can later subtract it as a deductible expense in the Income Tax return.
There is no need to pay taxes if the income is not payable
There is an exception in which landlords who do not pay tenants do not have to include those amounts in the Rent, and that is, according to the Treasury, when the rent is not payable. This occurs, for example, if the landlord and tenant have agreed to a deferral, temporary reduction or deferral of rent payment.
In these cases, the Tax Agency manual states that “it will not be appropriate to reflect a return on real estate capital in the months in which said payment has been deferred,” since there is no payment obligation at that time. Therefore, since there is no enforceability, there is no obligation to declare these amounts.