NEWS

TAX REGULATIONS IN HOLIDAY RENTALS

08Mar

Derecho Inmobiliario y cuestiones Fiscales

Many of our clients come to our office with questions concerning Holiday rental, and one of the most frequent questions is, what taxes must I pay?

In this article, let us summarize this information in a clear manner to be fully understood.

VAT

In spite of the fact that rentals are exempt from paying this tax, from the moment that these begin to offer additional services of hotel industry, beyond simply handing over keys and/or from the moment of marketing a dwelling in a web page such as «AirBNB», every taxpayer is obliged to the payment of VAT, as the law of this tax consider them as businessman or professionals.

What services does the Inland Revenue understand as additional to hotel industry? We herewith give some examples:

  • Cleaning of the property and change of linen (towels, sheets, etc) During the rental period, at least once a week.
  • Receiving and permanent continual attention to the client during a specified period of time.
  • Laundry, safekeeping of suitcases, newspapers, etc.

At present, the tax rate is that of 10%. In the case of intermediary companies, the rate of transfer should be studied in order to determine the invoices and tax rate .

INCOME TAX or NON RESIDENT INCOME TAX (IRPF or IRNR)

On producing an income, this is subject to tax in the yearly Income Tax (IRPF) declaration for those who are tax resident in Spain and it is possible to deduct expenses of repair and upkeep, insurances, interests, taxes, etc. The rate applicable of this tax is from 19% to 47,50%.

In the case of a non resident tax payer in Spain, the tax applicable is the Non Resident Income Tax (IRNR). The tax rate is 19% when the tax payer is resident within a member State of the EU. If the tax payer is resident out of the EU, the rate would be 24%. Lastly, in the case of permanent establishment in Spain the rate of 30% would be applied.

TAX ON TOURIST ACCOMMODATION IN THE BALEARIC ISLANDS

This tax applies to the tourist accommodation in the Balearic Islands and, in this case, the tax rate is of 1 euro per day per person, with the allowances, reductions and exemptions indicated by the Law. The declaration of this tax can be direct. In this case, quarterly declarations are made plus an anual declaration, with the obligation to hold a Registration Ledger and other documents indicated by the Law; or by objective assessment (the most normal) in which the Tax office of the Balearic Islands issues a yearly receipt (between the 1st May and 30th June) for its payment. It is the end user who, during his stay, must pay in cash this amount.

With this brief summary we hope to have clarified some of these main doubts concerning tax matters that worry those owners who decide to rent their dwellings to tourists. However, each case needs to be studied whereby it is advisable to always consult your lawyer.

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