July. It’s that month of the year again when landlords are - once more - making a killing through rental income. Have you tried booking in Spain a flat or villa in July, August, or September? Sorry, all taken!
One of the best, if not the best, business in Spain over the last 7 years has been to buy property with a view to rent it out, specifically as a holiday home (short-term). Property prices in Spain have strongly rebounded post-pandemic (since 2020) and we are witnessing an 8.5% YOY capital appreciation across the board (in coastal areas and large Spanish cities, it’s actually a two-digit property rise!). Property prices have risen in Spain for 11 consecutive months reaching all-new highs.
In addition to this, rental yields are growing year-on-year by two digits for three consecutive years! Spain now ranks as the world’s second tourist destination, trailing only behind the United States of America. The prospect of investing in Spain looks brighter than ever. You can expect a net rental yield of 4.5% per annum.
The union of both capital appreciation and soaring rental yields translates into a combined safe net yield of over 10% per annum!
Spanish real estate is poised for combined two-digit gains over the next years, interest rate fluctuations notwithstanding, easily winning alternative investments (bonds, commodities, cryptocurrencies, gold, etc) and paltry fixed returns in a context of historic ultra-low interest rates.
But wait, it gets even better!
Now that I have made a case on why buy-to-lets are indeed an excellent investment in Spain, I want to focus mainly on the huge tax advantages open to all non-resident landlords. Read on.
Tax deductions available for all non-residents apply to both short-term rentals (holiday homes) and long-term rentals
Non-resident landlords can take advantage of huge tax breaks on their landlord tax bill. In plain English, landlords can expect to reduce their tax bill by 70%, or more, by our accountants on filing their quarterly rental income taxes.
The following three requirements must be met:
- Landlord is tax resident in the European Union or EEA (your nationality is irrelevant).
- The expenses you claim are in direct relation towards the upkeep of the property i.e. claiming travelling expenses would be excluded.
- You have VAT invoices to back up your tax relief claim.
Non-residents in Spain (albeit EU-resident) may deduct the following expenses from their quarterly tax returns (not a closed list):
- Interests arising from a mortgage loan (to buy the property).
- Local taxes and administrative charges and surcharges.
- Expenses arising from formalising lease agreements.
- Maintenance costs may be offset; refurbishment expenses (improvements) are excluded (but may be claimed on selling the property).
- Community of owners’ fees.
- Home insurance premiums.
- Property repairs: plumbing, roof re-tiling, painting, pool pump etc.
- Utility invoices: electricity, water, gas, internet, and landline.
- Cleaning.
- Concierge, gardening, alarm & security services (i.e. gated communities).
- Lawyer’s fees: are 100% tax-deductible! Yes, our fees are also tax-deductible. i.e. to calculate and submit you quarterly tax returns.
- Property management fees.
- Advertising invoices from property portals, such as idealista: online/offline.
- Marketing expenses.
- Home depreciation and amortisation.
- Etc.
Please be advised that to take full advantage of the above-listed tax allowances you need to instruct a specialised accounting firm – such as us – with 20 years’ experience in non-resident taxation. Our clients are reducing their tax bills on average by 70%, or more, every tax quarter on renting out in Spain through us.
We have over 20 year’s taxation experience at your service. Call or e-mail us, our friendly staff will be delighted to guide you through the procedure and how we can assist you by greatly reducing your tax bill.
Our fee:
- EU resident: 125 euros plus VAT
- Non-EU resident: 75 euros plus VAT
To close, a gentle reminder that our accounting fee is also tax-deductible! We file taxes all over Spain, regardless of where your property is located! If you want to pay less taxes, please contact us. We offer this accounting service: Holiday Rental Accounting Service (HRAS).