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Holiday Home Taxation in Spain

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Holiday rental flat in Barcelona

This article is an outline of the way holiday-home rentals are taxed in Spain under current legislation (buy-to-let). I have simplified it to avoid unnecessary tax technicalities, and bear in mind that quoted tax rates are subject to change from one year to the next. Seek professional legal advice on your matter – see disclaimer below.

Holiday rental taxation in Spain

After a decade in the doldrums, Spain’s real estate market is once again picking up the pace showing indelible signs of warming up, spearheaded by Madrid and Barcelona. The market seems to be staging a comeback in full swing which is a welcome respite.

1. Asking rental prices are soaring by two digits year-on-year as reported by experts. The exact figure is contentious, as some prestigious media, like El Pais daily, quote a 21% annual increase whilst others, such as El Mundo daily, estimate the national average rental increase to be at 10.2%. In any case, minutiae aside, the consensus is clear and unanimous that we are witnessing a whopping two-digit rental growth in asking rental prices year-on-year:

2. Capital appreciation of well-located real estate is also rising fast (in some coastal areas by two digits).

The average rental yield in Spain can be expected at 5% pa (dependent on location). If to that you also add the potential of capital appreciation, Spanish real estate is poised for combined two-digit gains over the next years easily winning alternative investments and paltry fixed returns in a context of historic ultra-low interest rates.

Bottom line, go bricks for the win.

Limelight on Spain – why is it such an attractive place to live (and invest) in?

Spain is the world´s third country to attract more tourism (trailing closely behind the US and France) with over 68 million tourists as compiled by the United Nations World Tourism Organization annual barometer. An all-year-round mild weather, beautiful unspoilt scenery, great food, friendly natives, modern health and transport facilities, amenities and a rich cultural background make Spain a touristic hotspot to be reckoned with.

And last, let us not forget Spain´s renowned beaches. For almost 30 consecutive years Spain has led the world-ranking of Blue Flags awarded by the independent Foundation for Environmental Education with over 561 in 2015 trumping its closest competitor. Blue Flags are only awarded after meeting stringent requirements and are an indication of their high environmental and quality standards.

It is in this financial context that investors are showing increasing interest in the potential of buy-to-let properties in Spain. A burgeoning real estate market coupled with a consolidated tourism industry is luring investors to foray into the market in droves with a renewed sense of self-confidence.

Holiday Homes – Definition

What exactly qualifies as a holiday rental home or vivienda vacacional in Spanish? Spain is made up of 17 autonomous regions with devolved competencies on this matter. Many of these regions have passed on their own laws on what is classified as a holiday rental home. You can read further on the matter in my article Holiday Rental Laws in Spain – Explaining the Latest Changes. As an example, Andalusia approved last year its own regulation: Andalusia’s Holiday Rental Laws (Decree 28/2016).

Basically, and take good note I am generalising, holiday rental homes are let for short periods of time which vary between one day up to several weeks. The main point is that they are not regarded as the permanent abode of a tenant which is referred to as ‘guest’ or ‘lodger’ rather than tenant (as opposed to long term lets). Take note that in this article I am expressly ruling out dealing with what are known as apartamentos turísticos or touristic lets which have their own regulation and set of rules.

Landlords would do well to acquaint themselves with the regulation of the autonomous region where their property is located in Spain as some of them have stringent rules in place which require the property to be registered in an official registry and other regions even go as far as demanding a tourist rental licence from landlords without which you simply cannot rent out. Fines for non-compliance vary, but we warned you could be landed with a steep six-figure fine or even having a charge placed against your property. Some regions, such as Barcelona, have taken the matter to heart with the town hall employing over forty inspectors trawling websites and doing the legwork to flag unlicenced holiday rentals and fine them. It is estimated there are 17,000 holiday rentals in Barcelona alone of which 7,000 are deemed illegal.

Holiday Homes – Registration

In Spain, most regional authorities require landlords to register their properties in a Tourism Registry. Requirements vary from one region to the next but in general a Licence of First Occupation is a chief requirement to let. Breach of these rules may attract humongous fines such as those levied on AirBnb in the hundreds of thousands.

Our law firm offers a Registration of Holiday Rental Homes service for flat fee.

Holiday Rental Homes – Taxation

Holiday rental homes are, by definition, short-term lets. Tenancies exceeding two months fall under Spain´s Tenancy Act and are regarded as long-term lets which give way to a great number of tenant entitlements landlords should be keenly aware of.

In Spain, all joint owners of a property are treated as individualised taxpayers. Landlords need to file a quarterly tax model 210 in the first 20 days of every January, April, July and October.

In other words, one tax model needs to be submitted for each (joint) owner and also one for each guest. By guest it is understood as the leader of the group, he who pays the rental (not for every person lodging in a group).

Short-term landlords will additionally also be required to file an annual tax model (Non-Resident Imputed Income Tax).

As a recap, on renting out in Spain (whether long or short term) you have to pay two taxes:

I) Resident in E.U. or E.E.A.

Tax rate: 19% on rental income.
Tax relief: Yes, physical persons may deduct, for example, home insurance, mortgage loan interest payments, property maintenance expenses etc. Legal persons may also deduct rental-related expenses.
Dates: collected annually or quarterly.
Tax form: 210.

II) Resident outside the E.U. or E.E.A.

Tax rate: 24% on rental income.
Tax relief: no.
Dates: collected annually or quarterly.
Tax form: 210.

As can be gleaned, this can become tedious and very admin intensive for the average landlord. Which is where lawyers step in offering our legal and accounting services to cut through the red tape for a very competitive fee.

More information in my article Non-Resident Taxes in Spain.

With or without VAT (IVA)?

In principle, as a general rule, VAT is not applied to holiday rental homes. However, if you offer any of the following below your rental may be regarded as assimilated to offering hotel accommodation in which case you need to invoice everything with VAT which impacts the profit margin of the business increasing its costs:

  • Concierge service.
  • Daily changing of bed linen.
  • Daily changing of bath towels.
  • Daily cleaning of property/room.
  • Room service (food and beverage), catering.
  • Bed & Breakfast.
  • Other ancillary hotel services such as: daily press, laundry cleaning, luggage storage service, accommodation booking (holiday reservation).
  • Other.

Holiday Homes – Non-Resident Landlord Rental Tax Relief

Recent ECJ rulings have created in their wake new opportunities for (physical) non-resident landlords to take advantage of tax relief in equal footing to Spanish nationals which were previously barred to them.

Please read my two articles on the matter which clearly explain how landlords*, with the support of our law firm, can take advantage of tax rules greatly mitigating their tax bill:

Renting in Spain: Non-Resident Landlord’s Rental Tax Relief – 14th of January 2017

Renting in Spain – Landlord’s Taxation Guide – 21st of December 2016

*Non-EU landlord nationals are barred from benefiting from lenient tax relief.

Through our dedicated service Holiday Rental Accounting Service (HRAS) we are able to reduce – on average – 30 to 40% of a landlord’s taxable base on renting out property in Spain. Ask us.

Conclusions on tourist rental home taxation in Spain

As can be clearly surmised from the above, the taxation on private rentals may be somewhat convoluted given the fact that 17 different Autonomous Regions in Spain hold competence over them and rule accordingly. This requires the input of seasoned professionals to wade through the labyrinthian pitfalls and come out successfully.

Which is where we lawyers step in; hand-holding landlords and guiding them through the taxation ordeal to come up on top, working the system.

“90% of all millionaires become so through owning real estate.” – Andrew Carnegie.

Born in Dunfermline, Scotland, this 19th century Scottish self-made multimillionaire emigrated to the US at a young age. Carnegie led the expansion of the American steel industry in the late 19th century and through a string of savvy investments is often identified as one of the richest people and Americans ever. He will always be remembered for becoming a leading philanthropist for the United States and the British Empire giving generously to foundations, charities and university endowments.

Original article published at Larraín Nesbitt Lawyers:  Spain Holiday Home Taxation

We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on 951 894 675 or by completing our contact form.

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Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

2.017 © Raymundo Larraín Nesbitt. All rights reserved.

* This article has been written by a third party not owned or controlled by Spanish Property Insight (SPI).
SPI disclaims any responsibility or liability related to your access to or use of any third party content.

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5 thoughts on “Holiday Home Taxation in Spain”

  • Raymundo Larraín Nesbitt says:

    Morning Neville,

    Thank you for your kind words.

    Further to your query, they each have their own regulation, which varies from one region in Spain to the next. For reasons of space constraint I cannot list all the differences but basically a private holiday rental is regarded as an amateurish buy-to-let landlord that makes an extra on the side by renting out one or more properties. VAT does not apply to them.

    Apartamentos turisticos on the other hand are treated as a professional hotelier, as multiple units are rented out by a single company complete with 24-hour concierge, cleaning service etc. They have very strict regulation on making use of the property as it is legally earmarked as only for rental purposes which affects its sales price. VAT is applied to them.

    Hope that gives you an idea.

    Regards

  • GarySFBCN says:

    Thank you Raymundo for all of your informative articles.

    Regarding being a landlord of either a short-term or long-term apartment, as a legal resident but not a fiscal resident, does owning a rental unit automatically make me a fiscal resident? If so, does that mean all of my global income will be taxed in Spain? And are there legal tools to prevent my global income to be taxed until I am a full time resident of Spain?

    I’m in Catalunya and my spouse is a full-time resident and a Spanish citizen if that makes a difference.

    Thank you.

    • Raymundo Larraín Nesbitt says:

      Hi Gary,

      Thank you for your kind words.

      Short answer is no. There a majority of non-resident landlords who own properties in Spain and let them out as holiday rentals to fellow expats, but that doesn’t make them fiscal residents in Spain. Only their rental income in Spain is taxed following the table I give above depending on whether they are EEA/EU-residents or non-EU/EEA residents.

      In my article Non-Resident Taxes in Spain I lay out the conditions to be considered a fiscal resident in Spain:

      https://www.spanishpropertyinsight.com/2015/12/08/non-resident-taxes-spain/

      “This article deals only with non-resident taxes. To ascertain whether you qualify as resident or non-resident the Spanish Tax Office applies the following criteria:

      • You spend more than 183 days in a calendar year in Spanish territory.
      • Your centre of financial interests is located in Spain.
      • Your spouse and/or underage children live in Spain.”

      Regards

  • GarySFBCN says:

    Thanks again Raymundo!

    One more question assuming that I am a fiscal resident of Spain, I am a landlord and have taxable income not related to the apartment rental.

    Regarding the tax relief items for landlords listed above, is that tax relief limited to the total rental income from the apartment or, assuming it exceeds the amount of the rental income, can that tax relief be applied to the entire taxes owed on all income?

    GarySFBCN

Comments are closed.