Continuing on last week’s post (10% VAT on holiday homes), holiday home landlords must now raise VAT invoices with their guests as of the 1 December 2026. This is because the tax office now regards holiday homes as running a business activity. Going forward, landlords are regarded as businesspersons. This triggers accountancy, tax, and legal obligations.
But not all is bad news.
As a businessperson, you are entitled to a series of VAT deductions on filing your quarterly VAT tax returns, which brings down your tax bill considerably.
Once all the tax deductions collated below are applied, you can offset a tidy amount from your quarterly VAT filings, resulting in substantial tax savings.
Requirements
- It goes without saying that if an expense is not backed by a VAT invoice, you may not deduct it, i.e. cash payments to a service provider without a VAT invoice
- Any invoices claimed must be in direct relation to the activity of the rented property.
- VAT invoices raised by a service provider must be valid. *
*I refer you to our taxation article: VAT invoice dissected – 11th February 2019
If any of the points mentioned in our article are missing or are incomplete, the tax office may reject the invoice, and you cannot claim back or offset the VAT arising from it. This is why it is very important that service suppliers raise detailed and complete VAT invoices.
In conclusion, not every expense qualifies for a deduction. The expenditure must satisfy the relevant requirements, have a genuine connection with the taxable activity, and must be supported by proper VAT invoices.
How long should I keep VAT invoices?
We recommend that you keep them for a minimum of 6 years.
By law, you are strongly advised to keep the original VAT invoices in the event of a tax inspection.
VAT deductions
As you are running a business, you are legally entitled to offset VAT invoices raised by suppliers in direct connection to your business activity.
As a business, you may now deduct the following VAT incurred on expenditure in connection with the properties you own and run as holiday homes:
- Electricity, water, and gas
- Professional rental management services (i.e. the real estate agency that manages and runs all your guest accommodations)
- Professional accountancy services (like the accounting services LNA offers you)
- Professional advertising and marketing services
- Professional web keeping services (if you run a website to market and offer the rental accommodations)
- Professional house cleaning services, i.e. bed linen and towel laundry services, house rugs
- Professional security services
- Professional concierge services
- Professional gardening services
- General repairs and maintenance i.e. painting
- Furniture and equipment i.e. AC units, sun loungers
- Other services connected with your rental activity
We strongly discourage you from attempting to deduct VAT invoices on your own, this only leads to tax inspections. Any VAT accounting should only be left to registered professionals and companies like ours.
Larrain Nesbitt Abogados (LNA) offers a competitively priced VAT accounting service that takes away all the associated stress, ensuring timely compliance.
LNA-related accounting services:
- VAT quarterly tax filing
- Holiday Rental Accounting Service (HRAS)
- Non-Resident Imputed Income Tax, NRIIT (Annual Fiscal Representation Service)
At Larrain Nesbitt Abogados (LNA) we have over 23 years of experience specialising in property conveyance and taxation. We also assist clients with immigration & residency visas (digital nomad visa), and inheritance procedures (probate).You can contact us by e-mail at info@larrainnesbitt.com, by telephone on our UK line (+44) 0754 3838 218 or Spanish line (+34) 952 19 22 88, or by completing our contact form.
Please note the information provided in this article is of general interest only and is not to be construed or intended as a substitute for professional legal advice. This article may be posted freely on websites or other social media so long as the author is duly credited. Plagiarising, whether in whole or in part, this article without crediting the author may result in criminal prosecution. Ní neart go cur le chéile. Voluntas omnia vincit.
Larraín Nesbitt Abogados, small on fees, BIG on service.
