What are the tax implications of renting out a Spanish property?
Are you a non resident who owns a holiday home in Spain which you they rent out?
The rental income of non Spanish residents should be declared in Spain even it is properly declared in the country where you are tax resident (e.g. the UK which does expect its residents to declare any income from holiday rentals).
The tax is paid every quarter, in April, July, October and January.
If you have no incomes in one quarter you do not have to pay any tax.
Forms must be filed 20 days after the quarter ends.
If you jointly own the rental property with someone else (e.g. your spouse) both must submit forms. The names and NIE numbers of the people who rented the property should be included.
If the property is only rented out for part of the year, maybe even only a few weeks in the summer then the rent must be declared in the manner described above but the period during which there is no rental is also subject to a separate tax – the non resident tax that all holiday home owners who don’t rent out their properties face.
Note that UK taxpayers who declare the income on both their Spanish and UK tax returns can make a double tax claim to prevent them being taxed twice. This is made on the UK return and is equal to the Spanish tax paid or the UK tax liability whichever is the smaller.
Are you a Spanish tax resident who rent out a property other than their home
If you have a property you rent out in Spain and live in Spain yourself you will have to declare the income on your Spanish tax return every year, in the May-June period following the year of the rental i.e. in arrears.
The tax treatment is generous for residents:
• – there are deductible expenses allowed (e.g. utilities, advertising and legal costs, rates, and even interest and amortisation of the property)
• – there is a 50% deduction if the property is rented out as a dwelling (as opposed to a business)
Spanish tax residents who rent out their own property
Many people settling in Spain make extra money by running a holiday rental business based in their own property. The tax rules are more or less the same as those described above (i.e. rent from short term tourist lettings is treated much the same way as long term lets).
There are one or two points to consider:
– any claims for expenses must relate solely to the rental; you cannot rent out a granny annex for a few weeks and subsequently claim every item of household expense for the entire year. In fact if you live in the property it will be very hard to claim anything for utilities or rates for example as these would have been payable anyway as you live there and you are not allowed to start apportioning bills.
– Expenses related to the property which can be deducted:
Council property tax, house insurance, community fee, our fee for the calculation, utilities only if they are included on the rental income.
Maintenance services can not be deducted
– other issues can arise when the rental turns into a business. For example if you begin running a holiday business from your property which involves more than just renting out accommodation then you should register as self-employed. There is a grey area between renting out and running a business but the distinction is usually made on the basis of what extras are included for the renter. If they just receive a room then clearly you are just the landlord renting out space. If they are offered services over and above this like food or leisure/educational activities then you are probably running a business.
Many people choose to ignore declaring rental income, but if you wish to do it properly please contact us to see if we can help.