Declaring your income tax for rented property in Spain

As the deadline for the 2018 tax returns draws nearer, we remind you of the importance of doing your income tax returns in Spain and how to declare the IRPF if you rent your house to tourists and long-term tenants.

The Spanish Tax Agency, the Hacienda, demanded that thousands of taxpayers pay extra in 2017 when it detected that they had not declared their income from the properties that they rent out, many of them as short-term vacation lets. If you don't want to be caught off guard by a letter from the Treasury, be sure to declare income from long-term or holiday rentals.

Income tax on rental property in Spain

If you lease your Spanish property out long term, you can deduct 60% of the rental income (i.e. the amount resulting from subtracting deductible expenses such as taxes, supplies, maintenance, etc. from income), regardless of the age of the tenants. Up until 31st January 2014, landlords in Spain could deduct up to 100% of the expenses if their tenants were less than 30 years old, but that is no longer the case.

Deductible expenses include electricity, water, gas and telephone bills, home maintenance and repair expenses (excluding extensions and other non-essential work), plus interest on any mortgage loans taking out for the purchase of the home.

For tenants, the income tax deduction on their rent is only available for contracts signed before 1st January 2015. For tenants who meet this condition, the applicable deduction is 10.05% of the amount paid, provided that their taxable income is less than 24,107.20 euro. That’s on the national level, but aside from that there are many Autonomous Communities that also offer deductions linked to rent.

Income tax on holiday lets in Spain

Just as with long-term rentals, owners can also deduct the expenses of an apartment rented out for vocational purposes. As Rentalia, idealista’s specialist holiday rental platform, reminds us, you can deduct the costs of electricity, water, gas, loan interest and other financial expenses arising from the purchase of the house, the costs of repairing and maintaining the property and the premiums paid for home insurance. These deductions can only be applied for the periods in which the property is rented.

However, in this case, the owners cannot get a 60% reduction on the income they receive from the holiday rental.

Another of the most common questions holiday home owners have is whether or not they have to charge VAT to the travellers they lease to. In response to this, Rentalia reminds that if you only rent out the property it’s not necessary to charge VAT to your guests, but if you offer complementary services such as laundry or cleaning, you have to charge them VAT.

This counts as providing services in the same way as a hotel establishment, so you will have to meet these requirements: issue an invoice for each stay and apply 10% VAT to the price of accommodation.

If you are going to rent your property to a company, you will be able to pay less personal income tax and no VAT will be paid.

If you still have any doubts about income tax reductions in Spain for rented property, you can find more information on the Spanish tax office website.