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Don’t Forget To Pay Taxes For Holiday Rental!

Holiday rentals in Spain

The immense boom in vacation rentals is undeniable! From the owner of an apartment on the beach rented in the summer months to those who have become entrepreneurs running a rental business. 

All of these situations are regulated by law in continuous implementation. If you want to know more about it, keep reading.

 

How are these types of rentals regulated?

To begin, the assumption that we will deal with in these lines is the most common: an owner or a couple of owners who have a second home that they rent for small periods of time (days, weeks, fortnights, months) without this involving any professional activity in the field of hospitality.

Since the Government’s modification of the Urban Leasing Law in June 2013, which left out vacation rental homes, it is the Autonomous Communities that must legislate, the beginning of which was chaos.

Some communities were in a hurry to regularize the situation. However, it is true that to date, there are still communities that do not have any or little legislation in this regard. 

In fact, in some other autonomous community, the CNMC (National Commission of Markets and Competition) has intervened, causing a multitude of obstacles to carry out this simple activity, which is to put an apartment for rent.

 

In the case at hand, we are only interested in knowing that the Autonomous Community of the domicile imposes the rule and that in each one it may be different. Now, when declaring, you must take into account the situations in which your dwelling has been:

  • periods within the year in which it has been occupied by travellers (full income must be declared not including the deductible expenses for its rental, but only in the proportional part)
  • periods in which it has been empty at your disposal (income imputed by the Treasury as a second home).

 

Taxation of the dwelling when it has been rented

As we have already anticipated, you must first know the requirements imposed by the communities to be able to rent the house and have everything regulated. Thus, you avoid surprises, since the requirements or advantages to the rental imposed by the communities or the Treasury do not exempt each other.

The income obtained from the rental of your home must appear in “income from real estate capital” in the Income Statement (renta). These will be the difference between Total Income and expenses to obtain that income.

Specifically, you can subtract: the IBI, the mortgage interest, the garbage rate, insurance that covers risks in the dwelling, community expenses, expenses derived from achieving the rent as agencies or advertisements, amortization of the property or the belongings, provided they respond to effective wear and tear, electricity, water, gas, etc. But all this can be included in the proportion in which the house has been rented.

 

Example: 

If it has been rented for a total of 3 months in a year, you can include a quarter of them, except for the expenses that you have included as an advertisement or agency expenses that would be included in their entirety.

The amortization of the home has the requirement of, in each year, not to exceed 3% on the amortization basis, which is the greater of the following two: acquisition cost or cadastral value (always referred at the construction value, the part corresponding to the value of the land is never amortized).

Thus, the deduction of interest and financial expenses and the repair and maintenance expenses are limited to the amount of the income obtained from the lease of the property. In case it exceeds, they may be deducted in the following 4 years.

 

Taxation of the home when it has not been rented

The days in which the house has not been rented is taxed as a second residence in the tax return. As a general rule, you must pay an amount equal to applying 1.1% to the cadastral value of the home. Only in cases in which the cadastral revision is earlier than 10 years should a 2% be applied. 

The result obtained would be what you would have to pay if you had the house at your disposal all year. In case that it is a shorter period, you must obtain the proportion.

It is necessary to emphasize the need to pay taxes for these rents since, it has been known, that the Treasury has “caught by surprise” some owners who have carried out the advertisement and management of their homes in web platforms such as ‘Airbnb’. They are being required to regularize their earnings up to the last 4 years!

 

So, if you think you can take advantage of that cabin in the mountains or the apartment with sea views, do it! But first, inform yourself of all the requirements and then don’t forget to include those profits in the income statement.

 


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