Marbella-based lawyer Raymond Nesbitt gives us an overview on how the taxation for holiday homes work in Spain from a non-resident landlord perspective.
Larraín Nesbitt Lawyers takes the stress off your taxation making it easy, freeing you up so you can relax and spend more quality time enjoying what you value most in life.
The following article has been summarised to avoid unnecessary tax technicalities. The quoted tax rates are subject to change from one year to the next. The advice given is of a general nature and should not be construed as tailored tax advice. Seek professional legal advice on your matter – see disclaimer below.
Article copyrighted © 2018. Plagiarism will be criminally prosecuted
By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of July 2018
Introduction to holiday-rental taxation in Spain
I often get emails from distressed clients moaning on how the taxation on holiday lettings is convoluted and scares them off. I can relate to someone who, unaccustomed to dealing with taxes, let alone Spanish ones, may feel somewhat overwhelmed by the sheer over-complication and admin red tape involved.
Fortunately, that is where lawyers and economists step in, simplifying matters, and lending you an expert hand to file these taxes in exchange for a reasonable fee in your own language.
Following a new batch of regulation, non-resident landlords can now benefit from generous tax relief which used to be earmarked exclusively for Spanish resident taxpayers. These new laws have had a huge impact in taxation, vastly reducing non-resident landlord’s tax bills.
However, in our experience, few tax advisers are actually taking advantage of these changes in non-resident taxation or else purposely ignore them so as not to ‘overcomplicate’ themselves on filing tax forms! This translates into their clients facing large tax bills which could have been legally avoided if some care and diligence had been put in.
Larraín Nesbitt Lawyers offers a standardized tax service in English for non-residents which is easy to understand and very competitively priced. Do not allow yourself to be discouraged from renting out your Spanish property. As we care to quote in all our holiday home tax articles:
“We will save you more money on taxes than what you spend on hiring us.”
Ideally, this article should be read in tandem with the one we wrote last year on the same topic: Holiday Home Taxation in Spain.
Who qualifies for landlord tax relief in Spain?
- You are EU/EEA-tax resident
- You can attain a tax residency certificate from your home country
What makes our rental tax service different and why should you hire us?
- We offer to reduce your non-resident landlord tax bill by a minimum of 40% – or money-back guarantee. No questions asked. *
- On average, we reduce landlord’s tax on rental income by 70%, or more.
- Deal only with native English-speaking lawyers and economists. No lost in translation shenanigans.
- Very competitive fees.
- Fast, responsive, easy-to-understand tax service.
- We will calculate and put in writing exactly how much money on taxes we have saved you through our tax service.
*luxury rentals are excluded from this offer
New changes to non-resident taxation in Spain: the taxman knows
The Spanish taxman knows you are renting. Three landmark changes in taxation took place in 2018 which constitute game-changers.
Don’t make the glaring mistake of underestimating the Spanish Tax Office (AEAT) thinking it is unaware of your rental income business. You will be caught and slapped a fine. The Spanish Tax Office is actively cracking down on taxpayers, both resident and non-resident, who fail to file and report their rental income. Spain’s AEAT is slow albeit relentless.
- The Common Reporting Standard (CRS).
Over 100 countries signed an agreement to combat tax evasion. This agreement came into force in Spain on January 2018. It has as a pivotal hallmark the automatic exchange of fiscal information between countries on taxpayers. Signatory countries no longer need to formally request information on taxpayers, they receive it automatically – without even having to ask for it. Both the United Kingdom and the ‘not-so-united’ Kingdom of Spain have both signed it. It is foolish to think the (Spanish) taxman is not aware of your Spanish rental income if you have been declaring it in your home country in lieu of Spain. This tax on rental income should have been declared and paid in Spain, not in your home country i.e. in the UK. As a result of the CRS, you may have received earlier on this year letters from your Spanish bank asking you to disclose tax information or else threatening you to block your accounts in Spain.
An in-depth look into the impact of the CRS in our article: Non-Resident Income Tax.
Bottom line, your home country is busy informing the Spanish Tax Authorities – and vice versa – on your tax affairs: reported income, savings, assets, investments, pension pot etc.
- Full disclosure agreements signed in 2018 between the Spanish Tax Office and property portals (AirBnb).
“3.10 Tax Office
Hosts and Guests expressly grant us authorization, without additional notification, to disclose data of the Hosts and Guests and other information regarding both or their transactions, reservations, accommodations and taxes on accommodation to the relevant tax agencies, including, among other information, the name of the Host or Guest, the ad addresses, dates and amounts of transactions, NIF / CIF and contact information, as well as the amount of taxes that the Hosts have received from Guests (or that they owe to the first).”
These new terms apply to all properties located within Spanish territory. It doesn’t matter if you sign an agreement in the UK, it is the Spanish terms that are applied because the properties are located in Spain.
In short, AirBnb will tell the tax office everything they need to know. The tax office will be able going forward to calculate how much back tax you owe on undeclared rental income (and slap you fines and delay interests). This exchange of information begins end of 2018 / early 2019 backdated to May 2018.
It follows that if the Spanish Tax Office had AirBnb bend the knee – the most powerful of the pack – other portals will follow suit. It is only a matter of time.
If you have not been declaring and paying tax on your rental income in Spain, you should pre-empt fines, delay interests and surcharges by coming clean and filing taxes before the Spanish Tax Office is on to you.
Be proactive and speak to Larraín Nesbitt Lawyers to regularize your tax situation for a nominal fee ASAP. Be smart, avoid fines, penalties and delay interests!!
- Tax form 179
Last month, we saw the creation of the new quarterly tax form 179. This form creates the obligation for holiday letting intermediaries (i.e. property portals) to report to the Spanish Tax Office on a quarterly basis. They will supply all relevant information to the tax office on property identification, guest details, landlord’s rental income, number of days hired, method of payment, etc. Non-compliance by letting intermediaries has associated fines that range from €20 to €600,000.
Non-payment: Tax office penalties
The Spanish Tax Office has already issued warnings to over 134.000 property owners advertising holiday lettings over unpaid tax. Fines for non-payment of tax on rental income range from 50 to 150% of the undeclared amounts, plus delay interests. The AEAT can collect taxes dating back 4 years. These fines are in addition to those levied by Regional Tourist Authorities (see section below) on unlicensed holiday rentals (up to six-figures!)
If you want to take your chances with the Spanish Tax Office, good luck with that, you will receive a nasty letter such as this one: requerimiento inspección.
You only have 10 days to answer (in Spanish) the tax office’s letter. If you are a non-resident, chances are you won’t be able to and will be landing yourself in hot water.
Don’t risk it, pay your taxes. Larraín Nesbitt Lawyers will greatly reduce your tax bill.
Regional Tourist Authorities – attain a holiday rental licence
Several regions across Spain, on the back of popular uproar and nudged by the hotel industry, have enacted holiday home laws over the last years which range from the overtly permissive to uber-restrictive (i.e. Balears, Catalonia). All these regions require you attain a tourist rental licence if you do not want to be fined for leasing illegally to tourists.
The regional fines for non-compliance are steep across the board, reaching 6-figures in most cases. Take good note that these humongous fines imposed by Regional Tourist Authorities are totally unrelated, and in addition, to those imposed by the Spanish Tax Office on any undeclared rental income (see section above).
If you plan to offer your property out as a holiday rental, you should first register it and attain a Tourist licence from your Regional Tourist Authority.
—> Larraín Nesbitt Lawyers offers a 24-hour registration Tourist licence service exclusive to the region of Andalusia: Registration of Holiday Homes (Andalusia). We will set you up and make it very easy for you to start renting out legally in a jiffy.
Non-Resident Landlord Tax Obligations in Spain
Non-resident landlords are liable for the following two set of taxes, depending on whether you rent out or not.
I. You lease your property: Non-Resident Income Tax (NRIT)
On owning property in Spain and renting it out, whether long or short-term, you need to file a quarterly tax on your rental income. One tax form needs to be filed for every joint owner.
Filed: quarterly, on the first 15 days of every January, April, July and October.
- Resident in E.U., Iceland or Norway: 19% of net profit
- Rest of the world: 24% of net profit
—>We offer you this tax service: Holiday Rental Accounting Service (HRAS)
- 2 owners: €125/tax quarter/property. More than two owners is charged at a higher fee.
*Does not include additional accounting services such as VAT invoicing i.e. your tenant is a company.
II. You do NOT rent out your property: Non-Resident Imputed Income Tax (NRIIT)
Paid once a year
Even if you do NOT rent out your property in Spain, regardless, non-residents still need to file once a year this testimonial tax. Also, on the days you do not rent out your property in Spain these are taxed as imputed income on a pro rata.
It is a legal fiction whereby it is surmised that you derive some form of financial benefit from your Spanish home; that is why it is called non-resident imputed income tax as it is deemed. Spanish Authorities take the view an owner derives a benefit in kind from owning property, irrespective of whether it is true or not, and taxes it accordingly.
Filed: once a year, before end of December of following year.
Tax rates: Rent is assessed as 1.1% or 2% of cadastral value. Tax rate is applied on this amount.
—>We offer you this tax service: Non-Resident Income Tax (Fiscal Representation).
- €100/year *
*This fee includes up to two joint owners.
Dodging taxes on rental income is risky business in Spain following the changes above, besides many others I do not care to list e.g. cross-checking utility consumption against properties which are purportedly ‘empty’.
Bottom line, the tax office is launching a widespread campaign to catch all those landlords who systematically fail to pay taxes on their holiday rentals. Be legal, don’t get caught out.
Why pay more taxes than you ought to?
Don’t overpay taxes – contact us. Our team of native English-speaking lawyers and economists has a long track record (over 15 years’ experience) successfully assisting expats on their tax matters in Spain.
Come and speak to Larraín Nesbitt Lawyer’s friendly staff, we will mitigate your tax exposure with efficient tax-planning and avoid non-optimal taxation scenarios, within the law.
We file taxes all over Spain.
We offer the most competitive fees in the market.
Holiday Rental Accounting Service (HRAS) from only €125/tax quarter
We are specialised in taxation
Larraín Nesbitt Lawyers, small on fees, big on service.
Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyancing, inheritance and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at firstname.lastname@example.org, by telephone on (+34) 952 19 22 88 or by completing our contact form.
“Ofrecer amistad al que busca amor es dar pan al que se muere de sed.” – Gabriel García Márquez
Gabriel ‘Gabo’ José de la Concordia García Márquez (1927 – 2014). Colombian master novelist, short-story writer, screenwriter and journalist. Awarded the Nobel Prize in Literature in 1982. Outstanding example of the ‘magic realism’ literary Bewegung. Among his most lauded novels are One Hundred Years of Solitude, The Autumn of the Patriarch, and Love in the Time of Cholera. From humble origins and through great personal sacrifice, he turned in deposit bottles and collected old newspapers for cash in Paris, he rose to prominence with the invaluable support of his wife and closest friends.
Article originally published at Larraín Nesbitt Lawyers: Holiday Rental Taxation in Spain
Legal services Larraín Nesbitt Lawyers can offer you
- Non-Resident Income Tax (Fiscal Representation) from €90
- Holiday Rentals Accounting Service (HRAS) from €100
- Registration of Holiday Homes (Andalusia)
- Spanish Inheritance Tax (IHT)
- Spanish Inheritance Tax Assessment Report (SITAR)
- Wealth Tax
- Spanish Resident Income Tax (IRPF)
- Tax form 720
Holiday rental taxation-related articles
- Holiday Rental Laws in Spain – 8th of March 2015
- Non-Resident Taxes in Spain – 8th December 2015
- Holiday Rental Laws in Andalusia (Decree 28/2016) – 8th of February 2016
- Renting in Spain – Landlord´s Taxation – 8th of January 2017
- Holiday Home Taxation in Spain – 8th of July 2017
- Holiday Rentals in Andalusia Made Easy – 3rd July 2017
- Non-Resident Income Tax – 8th December 2017
- Holiday Rental Taxation in Spain – 8th July 2018
- Holiday lettings: with or without VAT? – 21st June 2018
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.
2.018 © Raymundo Larraín Nesbitt. All rights reserved.