The Supreme Court Clarifies the Leasing of Properties in Family Businesses

The Spanish Supreme Court has recently established an important criterion for the taxation of family businesses when interpreting the concept of economic activity in companies engaged in real estate leasing within family business groups.

The judgments, issued on 17 and 19 February 2026 (ECLI:ES:TS:2026:637 and ECLI:ES:TS:2026:640), provide clarity on the application of certain tax benefits linked to family businesses, particularly the 95% reduction in Inheritance and Gift Tax and the exemption in Wealth Tax.

In these rulings, the Supreme Court examines whether a leasing company can be considered to carry out an economic activity when the full-time employee required by the tax regulations is not directly hired by that company, but instead by another entity within the same family business group.

Under the current regulation, the existence of at least one employee with a full-time employment contract dedicated to managing the leasing activity is required. However, under the previous wording of the legislation — applicable to many cases that have generated litigation — the law also required the existence of a premises exclusively dedicated to the management of the activity, a requirement that was later removed.

Traditionally, the Spanish Tax Authorities have interpreted the employee requirement strictly, demanding that the employee be directly hired by the company owning the leased properties.

This interpretation has led to numerous disputes in family business structures, particularly in situations where administrative or management functions are centralized in a group company or in the holding company, while other group entities own the leased real estate.

In such cases, the tax authorities have often concluded that the leasing company did not carry out a genuine economic activity, thereby preventing the application of certain tax benefits associated with family businesses.

The Court considers that, in certain cases, the existence of human resources should not be assessed solely from the standpoint of each individual company, but rather within the broader context of the business group as a whole.

Accordingly, it accepts that the full-time employee required for the leasing activity may be hired by another entity within the group, provided that those human resources are effectively used to manage the leasing activity and that a common business organisation exists.

According to the Court, the key issue is determining whether the activity of the leasing company is functionally and economically integrated into the activity carried out by the family group.

The rulings establish an important judicial doctrine by stating that the existence of an economic activity in real estate leasing cannot be analysed in isolation, but must instead take into account the organisational structure of the business group.

According to the Court, what truly matters is not the formal location of the employee within the group, but the economic reality of the activity carried out and the existence of sufficient human resources to manage the leasing business.

Consequently, when the group’s human resources effectively participate in the management of the leased properties, the requirement of having a full-time employee may be considered fulfilled even if the employee is formally hired by another company within the group.

However, the Court warns that this interpretation cannot be applied automatically to any corporate structure, as each case must be analysed individually to determine whether there is a genuine functional and economic integration between the different companies involved.

In particular, this new approach makes it possible to recognise the existence of an economic activity in situations where, until now, the Spanish Tax Authorities had denied such classification simply because the employee was hired by another group company.

This may facilitate the application of tax benefits linked to family businesses, especially in holding structures where administrative or management functions are centralized.

Nevertheless, the practical scope of this doctrine will need to be assessed on a case-by-case basis, taking into account the actual organisation of the business group and the existence of sufficient material and human resources to effectively carry out the activity.

By recognising that human resources may be shared among different companies within the group, the Court strengthens legal certainty in the application of tax benefits related to family businesses.

In any event, the practical application of this doctrine will require a careful analysis of the structure and functioning of each business group, in order to determine whether the functional and economic integration required by the Court’s doctrine is actually present.