NEWS

Tax obligations for non-residents who own and rent property in Spain

Intended for

Individuals

You own a property in Spain, you are not resident in Spain and you rent your property, then you are obliged to pay income tax on the rent received in Spain.

The rental of accommodation is not subject to VAT. 

Foreign entities

 Foreign entities that rent their property are also required to pay income tax on the rent collected in Spain.

The Spanish tax authorities state that if the property is not used for short-term rental, the property is permanently available to the director and / or shareholder and / or staff of the entity and therefore there is a long-term rental.

If the property is not used for short-term rental, a long-term rental agreement must be drawn up and rental income must be declared in Spain.  

Entrepreneurship

The rental of accommodation is not subject to VAT, unless you transfer your property (this property, transfer or ownership) to an office that takes care of the entire rental for you. You or.  Your foreign entity is then considered an entrepreneur by the tax authorities.

You must register with the tax authority as an entrepreneur and submit a quarterly VAT return and, if a rental has taken place, an income tax return.  

You must calculate the VAT on the rent received and deduct the IRPF (income tax).  For more information about entrepreneurship in renting, please contact us.

Tax rates and calculation

The tax rate for non-residents residing in the EU is 19%.

The tax is calculated on the rent collected less a certain number of fees. The costs you are allowed to deduct must be direct or indirect costs necessary to make the rental possible.

For non-EU residents, the tax rate is 24% (2021 rate).

No deduction is deducted.

Deductible expenses

 There are 3 types of costs that you are allowed to deduct:

1. Costs directly related to the rental, such as dry cleaning, cleaning, garden maintenance, etc.

You can deduct these costs in full during the relevant quarter.  You can also deduct administrative costs, such as administrative fees or a law firm to handle the tax return for the return of rental income and the establishment of leases.

 This item also includes preservation and repair work done by a contractor, plumber, electrician, painter, such as a new front door or roof. Replacement of appliances, furniture, computers, etc.   You must specify in point 3.

2. Fees that you can deduct from the number of days you rented the property.

Some things you need to know about these costs:

As a depreciation, you are obliged to increase the value of the structure by 3%. The value of the building (construcción) is indicated on the IBI (property tax). If you are going to sell the property, Spain levies a 19% tax on the profit from sales (2021 rate). 

The amounts you deducted as depreciation must be added to the amount on which you have to pay income tax. The income tax is therefore increased.  Electricity, water, internet, gas, etc.  can only be deducted if these costs are included in the rental amount.

Mortgage interest can be deducted if you can prove that the mortgage or loan was obtained to buy the property in Spain.

3. Furniture, electrical appliances, computers, printers, radio, television, etc.

For these expenses, you need to determine the lifespan yourself. You must be able to  justify the service life during an inspection. The legal maximum lifespan is 10 years.   You can then deduct the investment per month in proportion to the days rented.   Example: coffee table 700 €, lifespan 3 years (36 months).  You can then deduct 19.44 euros per month for three years, but compared to the number of days  you rented at home.

As a rental agency, we followed the advice to always add a list of contents to the rental agreement.

This way, you can prove during an inspection that the purchases or replacements of items were necessary for the rental.

General remarks :                                                                                                                                                                                                                                                                                                                     

You can only deduct expenses if you have an official invoice with VAT (no presupuesto, oferta, albaran,  receipt, etc.). 

The invoice must be in the name of the owner of the property. Invoices can only be deducted in the quarter corresponding to the invoice date.

The tax administration may carry out checks. You must keep all your invoices.  We advise you to take photos that show that a repair or replacement was necessary. The retention period for tax returns, photos, invoices, etc. is 4 years.

You cannot deduct expenses that have nothing reasonably to do with the rental activity, such as a dinner with a single tenant, airfare for the rented property inspected, while a property manager has been appointed, etc.

Tax

1. No later than 20 days after the end of each quarter, a tax return must be submitted by each owner and for all leased properties. The name of the declaration is 'modelo 210'. If the return is submitted, the fee must also be paid immediately. The deadlines are: January 20, April 20, July 20 and October 20. Spain does not have a deferral system for filing tax returns.

2. The tax payable will be automatically debited from your Spanish bank account by the tax authorities if the declaration is submitted no later than 15 days after the end of each quarter.

3. If, during a quarter, the costs were higher than the rental income (loss), you will not recover any tax on you. Also, you can't compensate for the loss with future profits. You cannot file a tax return for the quarter  in which you made a loss after the end of the quarter. The report for the quarter in which you incurred a loss must be submitted between January 1 and January 20 of the following year.

4. You also don't have to file a return if you haven't rented in a quarter. You must report the days you did not have tenants by December 31 of the following year. The tax for these days is calculated on 1.1% (sometimes 2%) of the total cadastral value indicated on the IBI and on this result 19% or 24% (2021 rate) is collected.

This annual declaration is not mandatory for foreign entities established in countries with which Spain has concluded a tax treaty containing an exchange of information clause, such as the Netherlands and Belgium.

Late filing of tax returns

  Spain does not have a deferral system for filing tax returns.

- If the declaration is filed within 3 months of the deadline, the penalty is 5% on the tax payable.  

- If the declaration is filed between 3 months and 6 months after the deadline, the penalty is 10% on the tax payable.  

- The fine is increased by 5% every 3 months up to a maximum of 25%. - Statutory interest will be charged on the late payment tax.  

The legal interest rate for the year 2020 was 3.75%.

Problems filing your tax bill

 If you rent an apartment with garage and storage room and it is separate registered property and the use of garage space and storage room is included in the rent, there must also be a quarterly return.   are carried out on the garage space and storage room.

You must then allocate a portion of the rental income to the garage space and storage room.

If more than one person owns the registered goods, each owner must file a tax return on all registered property.

 We propose to approach this problem of declaration in a practical way as follows:

Each owner only makes a declaration about the property.

 Regulations for tourist rentals

Many autonomous regions have legislation regarding tourist rentals.

We advise you to carefully study this legislation before offering your property for rent.

You can be fined if you rent without complying with the legislation.

There are several municipalities that levy a tourist tax.

If you want more information, we can help you by referring good legal advice on this matter.