There’s a lot of demand for short term rentals during the peak season and demand for long term rentals is growing. For decades foreign homeowners in Spain have been renting out their properties at a low level and enjoying the extra income it brings. However there is a really low awareness of Spanish laws amongst these landlords which has led to mistakes and oversights which can have some scary consequences. As a Community President, it’s important to be up to date on these issues so you can properly advise your owners.
For instance, most of the homeowners renting their properties short term are not aware that they should actually be declaring the income and paying tax on it. The Spanish tax authority is now clamping down on this unpaid tax which has been estimated to be €104.8 million in the Malaga province alone. They have joined forces with the electricity companies to be able to prove that there is consumption during periods that the owners are not in Spain, therefore it must be being rented – crafty!
Perez Legal Group in Marbella has put together some advice on how to make sure that your rentals are conducted legally –
• Register your rental contract with the housing department in order to have full legal protection in the event of any court case about your rental.
• If you hire a real estate agency or management company to handle your letting, make sure they are adding VAT to the rent as this must be paid to the tax agency.
• Declare your rental income and set aside 24% of the rent as a withholding tax payable to the Spanish government every month or every quarter.
• Declare this income to the country where you are resident. The double taxation agreement between the two countries means that you can claim back from Spain what you have paid in the UK, so you are not taxed twice but you must declare in both countries.
• If you are a tax resident in Spain, you should add your rental income to your other income when you make your annual Spanish income tax declaration. If you register your property as a tourist letting operation, you can put down the maintenance expenses of your property as a business expense and deduct this from your tax.
In addition to declaring income made from property rentals – short or long term, landlords need to be aware of the tenants’ legal rights and not take steps to evict non-paying tenants without the correct legal knowledge or following the right processes.
In many cases frustrated landlords will cut off utilities, change locks or bring in friends to forcefully evict tenants, but in these cases tenants can report you to the police and you can be charged with harassment or assault. It can also be tempting to go and do an unscheduled inspection of the property, but you are not allowed to enter the property without written permission from the tenant, so take care! There’s a really good article about the Top 10 Mistakes when renting in Spain on Spanish Property Insight which is essential reading for landlords.