Taxation of Holiday Rentals in Spain
When renting out a holiday home in Spain, you must comply with certain tax obligations. Here are the details:
1. Taxation of Rental Income in Spain
For Non-Tax Residents in Spain:
- Tax Obligation: If you are not a tax resident in Spain but earn income from a rental property located in Spanish territory, you are required to pay taxes on that income (IRNR – Non-Resident Income Tax).
- Tax Rate:
- For residents in the EU, Iceland, and Norway: 19% of net income.
- For residents outside the EU/EEA: 24% of gross income (no deduction of expenses).
For Tax Residents in Spain:
- Rental income is taxed at progressive rates, ranging from 19% to 54%, depending on your total annual profits (IRPF – Personal Income Tax).
2. Deductible Expenses
For Residents in the EU/European Economic Area (including Iceland and Norway):
Non-residents in the EU/EEA can deduct certain expenses, meaning taxes are paid only on net income. Deductible expenses include:
- Mortgage interest related to the property.
- Maintenance and repairs (not major renovations).
- Owners’ association fees.
- Property Tax (IBI) and other local taxes.
- Insurance (e.g., home and contents insurance).
- Water and energy costs (only for the period the property was rented).
- Depreciation of the property (typically 3% of the construction value, excluding land value).
- Other property-related expenses.
NOTE: The deductibility of some of these expenses will be proportional to the number of days the property was rented.
For Residents Outside the EU/European Economic Area:
- No expense deductions are allowed. Taxes are applied to gross income at 24%.
3. Administrative and Tax Obligations
- Registration with the Spanish Tax Agency (Hacienda): Non-residents must register to file their tax returns.
- Form 210 (Non-Resident Declaration): This is the form non-residents must use to declare rental income.
- Rental License: Depending on the autonomous community, you may need a license to rent legally. Check the specific regulations of your autonomous community.
- VAT (Value Added Tax): Rentals that include additional services typical of the hotel industry are subject to VAT of 10% or 21%, depending on the case. Examples include cleaning, bedding, 24-hour telephone service, reception, or other hotel-like services offered in holiday rentals.
- Tourist Tax: In some regions, such as Catalonia or the Balearic Islands, it is mandatory to collect and declare a tourist tax.
Summary
- Tax Rates: EU/EEA tax residents pay 19% on net income, non-EU/EEA residents pay 24% on gross income, and Spanish tax residents pay between 19% and 54% on net income.
- Expense Deduction: Only possible for EU/EEA tax residents or Spanish tax residents and limited to specific expenses.
- It is important to file the correct forms and properly register the property to avoid penalties.