So what exactly qualifies your property in Spain as a rental holiday home?
With the rental industry booming in a beautiful country as Spain, vocational properties are seen more and more as an investment opportunity. Hence prices are going up constantly and it is definitely important to know the rules before you enter the game.
First of all, it’s worth mentioning that Spain is made up of 17 autonomous regions. Many of these regions have passed on their own laws in regards to holiday rents. Andalucia passed its Holiday Rental Law recently in 2016.
The first and general definition of a vacation property in Spain would be a property that is rented out in short periods of times which could vary from a single day up to several weeks. However, by now means would those periods be described as a permanent renting period of a long-term tenant concept.
Landlords that want to rent out their property on such short periods of time will require the property to be registered in an official registry and some regions even go as far as demanding a tourist rental license from landlords without which you simply cannot rent out.
With the industry being more tightly regulated in the last couple of years, the fines are soaring high for all illegal, unregistered lettings. So it goes without saying that starting a legal rental business is an important factor in your business plan!
Taxes related to holiday rentals in Spain
The general rule is that if you earn any income from a property you own and let in Spain, you are liable for taxation. It would be best to look at the four different taxpayer cases in Spain: a resident individual or company and a non-resident individual or company.
Resident Taxpayers Individuals versus Companies
Individual tax residents of Spain are required to declare any income they earn and pay tax in accordance with Impuesto sobre la Renta de las Personas Físicas (IRPF, income tax)
On the other hand for companies that are resident in Spain would declare their revenues and pay tax under the Impuesto sobre Sociedades (corporate tax).
Individuals paying IRPF would have a scaling payment scheme on total earnings during a fiscal year. On the other hand companies generally would pay corporate tax at a flat rate of 25% on any amounts of profits made
Non-Resident Taxpayers Individuals versus Companies
For all individuals and companies renting out holiday homes, the taxation system becomes a bit more complicated as it will always also depend on your country of residency. Both identities are required to pay the Impuesto sobre la Renta de No Residentes (IRNR), which will vary as mentioned depending on whether you reside within European Union or not.
Tax residents of other EU member states are liable to pay IRNR at a flat rate of 19% on any income or profits earned in Spain, whereas residents of the rest of the world are required to pay IRNR at 24%.
Timings for tax declarations
Residents tax declarations are part of their annual IRPF tax return to the Agencia Tributaria (AKA Hacienda, Tax Agency) and settle any taxes due in June of the following year.
Non-residents, on the other hand, have to pay on a quarterly basis, within a period of 20 calendar days after the end of the quarter.
For all residents that reside outside of the EU landlords are able to deduct costs arising from maintenance of the property, although this does not include: financial costs that could be interesting on mortgages/ loans, although not the capital; and any taxes, charges or other running costs, including the Impuesto sobre Bienes Inmuebles (IBI, property tax), refuse collection, insurance, community fees and depreciation related to the property.
With or without VAT (IVA)?
As a general rule VAT is not applied to holiday rental homes. Unless if you offer any of the below services then your rental may be regarded as similar to hotel accommodation This will imply VAT application in all transactions affecting your margin.
Daily changing of bed linen.
Daily changing of bath towels.
Daily cleaning of property/room.
Room service (food and beverage), catering.
Bed & Breakfast.
Other extra services such as laundry cleaning, luggage storage of luggage, accommodation booking (holiday reservation).
Conclusions on tourist rental home taxation in Spain
Holiday rentals are definitely a good way of earning money and bringing an extra income to your home! It’s one of the industries that will always be marketable and profitable long-term. However, with all the recent year hype around holiday rentals in Spain and tourist rates going insane, it is important to follow the rules and stay tuned. Rafleys offers you its marketing services, legal services and off and on ground management, advertising your property to more than 50 portals and audiences!
Moreover, given that the taxation on private rentals may be somewhat confusing given the fact that 17 different Autonomous Regions in Spain hold competence over them, we can recommend you independent and competent lawyers that will help you register, earn and declare taxes on your property!