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VAT on Rental Income In Spain

Tax Agency (Hacienda)

rental income

When we talk about online platforms and rental income, we think about Airbnb. That company has become the colossus of intermediation between owners of rental homes and tenants.

The great success of this platform is due to how easy it is to publish your home for rent. They provide a very intuitive website and many tutorials. You can choose your tenant based on the comments and scores of other property owners.

This facility “in the business” may cause many owners not to consider the tax implications. Our article intends to describe how VAT works in these housing leases for tourism purposes.

Who is the owner of the property?

Is the owner of a property for rent an entrepreneur or professional for VAT purposes?

The short answer is yes. We find that in art. 5 of the LIVA (from now on, VAT Law). There we read that entrepreneurs or professionals are considered those who make one or several deliveries of goods or services that involve the exploitation of a tangible or intangible asset to obtain continuous income over time, particularly property lessors.

Following the previous, we should consider that the landlord of a dwelling is a professional for VAT. So, the lease, as mentioned above, will be subject to that tax.

So, why do home rentals not carry VAT?

Because there is an exemption included in art. 20.uno.23. There, we read that the leases of buildings or parts destined exclusively for housing are exempt from VAT. That is why when a homeowner rents it for other uses than housing (for example, offices or professional offices), that lease is subject to VAT.

What’s the relation with complementary services?

Yes, we apply VAT to housing leases for tourism purposes, including some complementary services specific to the hotel industry.

The VAT Law sets as examples of “complementary services specific to the hotel industry” those of restaurant, cleaning, laundry or other similar (art 20.uno.23º b. LIVA). In that sense, we can characterize lodging services by extending attention to customers beyond the mere provision of a property or part of it.

The lodging activity usually includes the provision of a series of services such as: 

– Reception and permanent and continuous attention to the client in a space designed for that purpose. 

– Periodically cleaning the property and accommodation.

– Regular change of bed and bathroom linen. 

– Making available to the client other services such as laundry, luggage storage, newspapers, reservations, etc. 

– And, sometimes, provision of food and catering services (DGT Inquiries V0081-16 and V0575-15).

But what are complementary services?

In particular, we consider complementary services, in addition to those mentioned above, the cleaning services of the interior of the apartment. Also, the clothes change services in the apartment provided regularly.

On the contrary, we can’t consider the following complimentary services:

  • Cleaning service of the rented apartment at the entrance and at the end of the period contracted by each tenant.
  • Clothes change service that we do at the entrance and the end of the period contracted by each tenant.
  • Common areas of the building cleaning service such as doorway, stairs and elevators. And the location is essential: green areas, access doors, sidewalks and streets.
  • Technical assistance and maintenance services for possible repairs of plumbing, electricity, glassware, blinds, locksmith and electrical appliances.

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