The following blog post is an abridged version of our in-depth tax article: Holiday Rental Taxation in Spain
Blog post copyrighted © 2018. Plagiarism will be criminally prosecuted.
By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
1st of October 2018
Often many distressed landlords moan on how the taxation on holiday lettings is convoluted and scares them off. Fortunately, that is where lawyers and economist step in, simplifying matters.
Non-resident landlords can now benefit from generous tax relief which used to be reserved exclusively for Spanish resident taxpayers. These new laws have had a huge impact in taxation, considerably reducing non-resident landlord's tax bills.
Few tax advisers are taking advantage of these new changes in non-resident taxation or else intentionally ignore them; this translates into their clients facing large tax bills which could have been legally avoided if some care and diligence had been put in.
Who qualifies for landlord tax relief?
The Spanish taxman knows you are renting. Three important changes in taxation took place in 2018. Don't make the glaring mistake of underestimating the Spanish Tax Office (AEAT) thinking it is unaware of your rental income business. The Spanish Tax Office is actively cracking down on taxpayers, both resident and non-resident, who fail to file and report their rental income. Only last year they issued warnings to over 134.000 property owners advertising holiday lettings over unpaid rental income tax.
Over 100 countries signed an agreement to combat tax evasion. This agreement became effective in Spain in January 2018. It has as a hallmark the automatic exchange of fiscal information between countries on taxpayers.
Signatory countries don’t need to formally request information on taxpayers, they receive it automatically. Both the United Kingdom and Spain have both signed it. This tax on rental income should have been declared and paid in Spain, not in your home country. As a result of the CRS, you may have received earlier on this year letters from your Spanish bank asking you to reveal tax information or else threatening you to block your accounts in Spain.
Bottom line, your home country is busy informing the Spanish Tax Authorities and vice versa, on your tax matters.
The US giant AirBnb finally yielded and agreed on signing a full disclosure agreement with Spain's Tax Office.
These new terms apply to all properties located within Spanish territory. It's doesn't matter if you sign a holiday home agreement in the UK, it is the Spanish terms that are applied because the properties are located in Spain.
In summary, AirBnb will tell the tax office everything it needs to know. Going forward, the tax office will be able to calculate how much back tax you owe on undeclared rental income. This exchange of information begins early 2019 backdated to May 2018.
If you haven't been declaring and paying income tax on your rental income in Spain, you should pre-empt fines, delay interests and penalties by coming clean and filing taxes before the Spanish Tax Office is on to you.
In spring we saw the creation of the new quarterly tax form 179. This form creates the obligation for holiday letting intermediaries to report to the Spanish Tax Office on a quarterly basis. They will supply all relevant information to the tax office on property identification, guest details, landlord's rental income, number of days hired, method of payment, etc. Non-compliance by letting intermediaries has associated fines that range from €20 to €600.000.
Non-payment: Tax Office penalties
Fines for non-payment of tax on rental income range from 50 to 150% of the undeclared amounts plus delay interests.
The AEAT can collect taxes dating back 4 years. These fine are in addition to those levied by Regional Tourist Authorities on unlicensed holiday rentals (up to six-figures!).
Regional Tourist Authorities: attain a holiday rental licence
Several regions across Spain, have enacted holiday home laws over the last years. All these regions require you attain a tourist rental licence if you don't want to be fined for leasing illegally to tourists.
The regional fines for non-compliance are steep across the board, reaching 6 figures in most cases. Keep in mind that these huge fines imposed by Regional Tourist Authorities are totally unrelated and in addition to those imposed by the Spanish Tax Office on any undeclared rental income. If you plan to offer your property out as a holiday letting, you should first register it and attain a Tourist licence from your Regional Tourist Authority.
Non-resident landlords are liable for the following two sets of income tax, depending on whether you rent out or not your property in Spain.
On owning property in Spain and renting it out, whether long or short-term, you need to file a quarterly tax on your rental income. One tax form needs to be filed for every joint owner.
--->We offer you this tax service: Holiday Rental Accounting Service (HRAS) from €100/tax quarter
Paid once a year
Even if you don't rent out your property in Spain, regardless, non-residents still need to file once a year this tax. Also, on the days you don't rent out your property in Spain these are taxed as imputed income on a pro rata.
--->We offer you this tax service: Non-Resident Income Tax (Fiscal Representation) from €90/year
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Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.
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