The Supreme Court has relaxed the criteria for classifying property letting as an economic activity, for the purposes of applying the exemption from Wealth Tax and the 95% reduction in Inheritance and Gift Tax

The Supreme Court, in its judgments of 17 and 19 February 2026 (appeals 1196/2024 and 1326/2024), has examined the question of when the requirement to employ a full-time employee in order to classify the activity of letting property as an economic activity, as provided for in Article 27.2 of the Personal Income Tax Act, is deemed to have been met, in cases where the entity carrying out that activity belongs to a group of companies and its staff are employed by another entity within the same group.

The question of appeal sought to determine whether, for the purposes of applying the reduction in the tax base provided for in Article 20.6 of the Inheritance and Gift Tax Act for the inter vivos transfer of shares in entities to which the exemption regulated in Article 4(8) of the Wealth Tax Act applies, this requirement can be deemed to be met when the letting activity is carried out using centralised human and material resources.

The Supreme Court has ruled that, where the letting activity is organised using human and material resources effectively assigned to a joint economic activity of the group, even if centralised in other companies within the group, the requirement to have a full-time employee is deemed to be met.

The essential and decisive factor in answering this question, the judgments emphasise, is that there must be a genuine organisation of resources and unity of economic activity at group level, of which the letting activity forms part and is functionally integrated into, serving that activity.

Otherwise, the mere belonging to a group of companies, without being functionally integrated into the activity of the group as a whole, requires that compliance with the requirement set out in the aforementioned Article 27.2 be verified separately at the registered office of the entity engaged in property letting.