Renting in Spain: Non-Resident Landlord's Rental Tax Relief

Raymundo LarraĆ­n Nesbitt, January, 14. 2017

EDITOR'S NOTE: Solicitor Raymundo Larraín Nesbitt explains the rental reliefs non-resident landlords may now benefit from, following a recent European Court of Justice ruling.

 

 

By Raymundo Larraín Nesbitt
Lawyer – Abogado
13th of January 2017

Following a recent European Court of Justice ruling, non-resident landlords may now benefit from the same tax allowances that were previously earmarked for Spanish residents. This will greatly mitigate your tax bill on renting out your Spanish property.

You can read a long unabridged article on the matter here which explains the changes in more detail, or else continue reading for the short version.

What is required by a non-resident landlord to deduct Spanish rental expenses?

  • Currently only residents in the EU or EEA qualify to benefit from rental allowances.
  • You will need to produce a certificate of tax residency in the corresponding State issued by the tax authorities of that State which will be required on filing the tax return.
  • Proof must be supplied that the following (deductible) expenses are directly related to rental income earned in Spain and have a direct economic connection that is inseparable from the activity carried out in Spain.

 

 List of expenses that can be deducted from your rental income

 

This is a closed list. In addition to the letting reliefs listed below some regions in Spain may offer additional rental deductions.

  • Interests arising from a loan to buy the property (i.e. mortgage loan).
  • Local taxes and administrative charges and surcharges that impact on the rental income or else on the property itself (i.e. IBI tax, SUMA tax, rubbish collection tax).
  • Expenses arising from formalising rental contracts such as lets or sublets (i.e. Notary and/or Land Registry fees); legal defence (i.e. hiring a lawyer for tenant eviction purposes).
  • Maintenance costs may be offset; refurbishment expenses (improvements) are excluded.

 

Examples of maintenance costs (deductible): repainting over flaky paint, plumbing, debugging, tennis court green mold cleaning, swimming pool pump replacement, annual lift maintenance, leaking faucet.

Examples of refurbishment expenses (non-deductible): glass curtains, double-glazed windows, parquet, marble floor, extension to property (outbuilding), tennis court, swimming pool, private lift.

Notwithstanding the above, refurbishment expenses (improvements) may be claimed on selling the property by offsetting them against your Capital Gains Tax liability. Please read my article: Taxes on Selling Spanish Property.

  • Home insurance premiums (theft, fire, civil liability etc.). Please read my articles Home Insurance in Spain, Community of Owners’ Insurance Policies and How to Cancel your Home Insurance Policy in Spain. However claims arising from events that diminish the value of a dwelling are non-deductible i.e. fire.
  • Utility invoices (electricity, water, gas and landline).
  • Concierge, gardening & security services (i.e. gated communities).
  • Rental publicity expenses.
  • Home depreciation and amortization. The calculation is 3% on the highest value of the following two: home buying costs or cadastral value; the value of the land is excluded.

 

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