[Anonymous]

Hi there. I’m a newbie at this so please be gentle!
We’re thinking about buying an apartment in Mallorca for use as a holiday home and would to rent out to others, although we would only rent out to UK residents and be paid here in the UK.
From what I can gather I have to declare the profit from the rental to the Spanish authorities and pay them tax, BUT I also have to do the same in the UK with HMRC. I am confused as this seems like paying the tax twice. On reading the notes on the HMRC web-site it says that if you pay tax in another country, in this case Spain, you can claim a ‘tax credit’. Does this mean that you end up paying the tax just once? Or have I got it completely wrong! 😯

[Anonymous]

@dave: Firstly do not rely on rental income in terms of your budgeting/cashflow. This has always be the case and more so in today’s time when there are hundreds of British property owners trying to do the very same and with Greece, Turkey, Egypt, Morocco, Croatia sucking in a lot of holiday makers to their shores.

I do not see why you only have to rent to British only. Do not rely on friends & family. As far as the guest respect your property what does it matter where they come from ???. You are not going to marry them or adopt them as your in laws.

The HMRC rule is and this international agreed with most countries.

a) The property is first taxed in the Country where the propety is situated.
b) As a tax payer you are taxed on your wordwide income. In your case you are UK based for tax residency.

First if your net income from the Spanish property is say £500 & you have paid £100 tax in Spain. When we come to your UK income say that is £34,500 on this you pay a tax of say £4500.

Your total world wide income in UK will be Spanish rental income of £500 +UK of £34,500=£35,000. The tax on this would say £5200.

You have paid tax of £ 4500 in UK & £100 in Spain, total tax paid £ 4600 . You now have to pay £600 tax in UK i.e. £5200 is your total liabilty you have paid £4600 the balance. ( This what is meant by tax credit )

It should be noted that if you had over paid in Spain or in a Country where the tax rate is lower. UK will not refund the difference. However if it was the other way round UK will demand the difference. I guess you knew this !!!!!!!!!!!!!

Further caution. Spanish tax in unjust, unfair, complex, cumbersome & frankly even the people at the Hacienda do not know what they are doing. I am certain that many expats feel frustrated with the system even where as good citizens thy wish to pay their fair share.

Good luck. My advise will be
a) Do not buy & rent if you like to be there.
b) If have to buy than just dont rent it. By all means invite your family & friends, extand some happiness & joy to them. It is a wonderful feeling and I do not play Santa as a rule.

If you have paid the tax in Spain e.g £100. and your net income is added on to say your income from employment

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