Holiday rentals were hit hard by the pandemic this year, and the Spanish tax authorities now say owners must pay an imputed income tax on the empty days.
A reader recently wrote to me saying “I own and let a holiday property in Spain. I pay my taxes every quarter, and now it looks like I will be taxed on the days my property is not let. This year my rentals have been affected by COVID 19, and I have had no bookings since March. Is it true I will now have a tax levied on the empty days? It will be an enormous bill!”
I hate to say it, but it looks that way, though in many cases I don’t think the bill will be enormous.
If you own a holiday home in Spain that you rent out when not using it, you are expected to pay income tax on the rental income. If you don’t rent it out, you are expected to pay tax on an imputed income, a type of wealth tax. You can read about these Spanish taxes on property here.
Now according to a recent clarification by the Spanish tax authorities, if you rent out your holiday home but didn’t get any clients thanks to the coronavirus crisis you will have to pay the imputed income tax on the empty days. And you won’t be able to deduct any expenses either. The government wants its pound of your flesh whether you had clients or not.
What can you do about this? Lawyers quoted in the Spanish press say you should declare and pay the imputed income tax for 2020 when declaration time comes around in 2021, and then appeal against the tax and request a refund.
How much money are we talking about? I guess we are talking about a few hundred Euros or less in many cases. Is it worth going to the hassle and cost trying to reclaim a figure like that? In my experience, it isn’t.
Which brings me onto a devious wheeze that is cynically used by the tax authorities in Spain. They love relatively small fines and penalties that the bureaucratic Spanish system makes time-consuming and costly to contest, safe in the knowledge that only a tiny percentage of people will bother to do so, however unjustified the penalty.
Parking and traffic fines are a classic example. I’ve just been hit with a traffic fine of €330. I have no idea what it related to, but my lawyer advised me it would cost more than the fine to contest it, so I just had to suck it up.