Homeowners who rent closed properties or convert property from short-term to long-term leases will be able to exempt tax on income derived from those rentals, under new rules. This exemption for rental income will appear on the statements on the 2025 tax returns.

So, the tax exemption for closed properties is a breather for landlords who choose to lease out their properties on long-term contracts. The full exemption from personal income tax on income from residential leases will apply for the first 36 months after the month in which the lease of a property falling into the following two categories is entered into.

The conditions for tax exemption are that the dwelling must have a maximum floor area of 120 square meters or less, as well as be leased under a lease with a three-year contractual term for residential use, and that timely information and income tax returns have already been submitted to the AADE.

How to activate the tax zeroing arrangement

The full exemption from income tax of individuals from the rental of residential property will be effective for the first 36 months after the month in which a residential property falling under these two categories is leased. However, the following conditions must be met

-The dwelling must have a maximum floor area of 120 m2

-To be let on a lease for a contractual term of three years for residential use.

-The legal prerequisites must be established only by timely information and income tax returns.

-It must have been declared on the E2 form of the income tax return as a NON-owned property; or

-It MUST NOT have been reported as rental property, either as a primary or secondary residence of the lessor, or as owner-occupied or free-rental property, on Forms E1 and E2 of the income tax return for tax years 2022 and 2023 and for the year 2024 if it is leased in the year 2025.

-No other lease information return for the property has been filed with the AADE during the year of the lease and up to the commencement of the lease.

The requirements for residential properties that were made available on a short-term lease

-It must have been lawfully and exclusively disposed of for short-term rental in tax year 2023 or in tax year 2024 if the lease is established in 2025.

-Short-term leases entered into must have been reported to the tax administration.

-Have filed a short term lease return in the year of the lease and up to the commencement of the lease.