Tax in Spain can be an extremely complicated affair for individuals renting a Spanish property, whether or not you are a resident for tax purposes. If you stay in Spain for more than 183 days in any given tax year, then under Spanish law you are considered a resident for tax purposes.
The current rental income tax rate for EU members and EEA residents is 19%. For non-residents in Spain from non-EU member states or non-EEA countries, the tax rate is 24% of gross income. Non-residents of an EU member state or EEA country on capital gains or where an effective exchange of tax information exists will be charged an income tax rate of 19%.
Owners of rental property in Spain have been reminded by the Spanish tax authorities, the Agencia Tributaria, that they have a number of Spanish tax obligations, even if they are renting them out for short periods.
Rental Income Tax and Holiday Lets
Holiday rentals are often a popular route for expats. In Spain, many expatriates rent out their homes to tourists for short periods of time due to the high financial return. Nevertheless, the concept of having a part-year resident is not endorsed by Spain, so owners are still required to pay taxes for that tax year.
However, providing that the homeowner can supply proficient proof to Spanish authorities, they can have their expenses deducted.
Costs such as water, electricity, gas and other expenses associated with purchasing and maintaining a property can be waived for the duration in which the property was being rented.
The Spanish tax authority also requires owners to charge holidaymakers VAT if they offer a complimentary service such as a laundry amenity.
VAT equivalent payable on Spanish rental properties
IVA, which is the Spanish VAT equivalent, is levied at 10% on property rental. This includes those renting out their Spanish property through Airbnb, Homeaway, Booking, or Niumba platforms.
Tourist rentals versus hotel services
The Spanish tax authority says in an advisory note, here translated into English, “In recent years there has been an increasingly significant increase in the use of private accommodation for tourism – that is what is called tourist rental – and it is necessary to differentiate it from the services provided by the hotel industry.”
There are differences in tax treatments for tourist rentals from that of the hotel industry, it points out. For instance, Agencia Tributaria advises on the VAT regulations for apartment cleaning services and bedding changes under Law 37/1992 on Value Added Tax (LIVA). If such services are accounted for at the start or end of the process of the booking, they are tourist rental services and if they are contracted during the rental period they are classed as hotel service.
If a property is regularly rented for tourist purposes, it needs to be registered for Impuesto de Actividades Económicasn (IAE).
Private holiday rentals
Profit from the temporary lease of a furnished property, marketed to tourists through the media, is considered a private holiday rental and is governed under the Article 5 e) of the Act 29/1994, of 24 November, on Urban Rental.
In the hotel industry, interior cleaning, as well as changes of bed linen, are normally considered as complementary services, according to the Spanish authorities’ guidance.