Belgians and Dutch people are often interested in renting out their second residence. This is often to recover the fixed costs of a second residence through rental income. The second residence can also be considered an investment property. Therefore, in this article we will discuss Spanish taxes on rental income for Spanish non-residents.
First, we will explain how to calculate the taxable base of rental income. The taxable base is the basis for calculating the actual tax, i.e. the amount to which the tax rates are applied. We will then explain the rate and go into more detail on VAT.
Taxable basis for the period in which you rented out
To determine the taxable base of Spanish rental income for residents, we create a distinction between the period during which you rented out the property and the period during which you did not let the property.
In the period in which you rented out the property you must include all income. So not just rental income, but also the costs you charge the tenant, such as electricity. Up to six months of rent arrears will also be charged as income.
You may deduct costs from the rent if the costs were incurred during the rental period and if the costs were incurred to rent out the property. Deductible costs include mortgage interest, repair and replacement costs (not renovation costs), municipal taxes such as the IBI, utilities, contributions to the community of co-owners/urbanisation, cleaning costs, insurance, publicity and brokerage costs, property depreciation of 3% per year, moveable depreciation of 10% per year, etc.
An example. You have an energy bill from 01/10/2023 to 31/10/2023 for 100 euros. You have rented out 7 days. Then the deductible cost is 22.58 euros (=100/31*7).
Another example. You have a water bill for the consumption period 10/09/2023 - 31/10/2023 (51 days) of 100 euros. This bill relates to two quarters, namely quarter 3 2023 and quarter 4 2023. In quarter 3 of 2023, the invoice relates to 20 days. You rented out 10 days in September, from 20/09/2023 to 30/09/2023. Then we arrive at €39.21 (=100/51*20) as a base. The deductible cost in the third quarter is 19.60 euros (=39.21/20*10).
In property depreciation, you distinguish between the value of the land and the value of the structure. Only the value of the structure can be depreciated. To determine the construction share, look at the ratio of the cadastral construction value to the total cadastral value and apply this to the current value, plus transfer taxes and notary and registration fees and any renovation costs.
Note: you may deduct these costs if they were incurred during the rental period. Thus, you will have to prorate annual fixed costs. If you rent for 6 months a year, you can only deduct half of the fixed costs.
Rental income less deductible expenses constitutes taxable income.
Taxable basis for the period when you did not let
In the period during which you did not let the property, you are taxed on a cadastral income, the 'imputación de renta inmobiliaria'. Here, you take 2% of the cadastral value as shown on the IBI assessment notice, or 1.1% of the cadastral value if the cadastral value was revised in the last 10 years. If no cadastral value is available, take 50% of the purchase price.
An example. The cadastral value of your property is €100,000. This value has not been revised in the last 10 years. From this, you take 2%, so the taxable income comes to 2,000 euros. If you have rented out 6 months, the taxable income is therefore 1,000 euros.
Calculation of total taxable base
To calculate the total taxable income, take the taxable income from rentals and the prorated cadastral income. The total rental income after expenses should never be less than the cadastral income for one year. So in the example above, the minimum taxable income is 2,000 euros.
An example. You have rented out your property with a cadastral value of 100,000 euros during the summer months. The total rental period is 50 days. The rental income less deductible expenses is 4,000 euros. The cadastral income comes to 1,726 euros (2,000 euros /365 *315). The total income then comes to 5,726 euros.
Rates for Spanish taxes on rental income
On the taxable base, apply the rate to calculate the final tax. For non-residents, the rate is 19% if they are resident within the European Union or the European Economic Area. For other non-residents, the rate is 24%.
Should I charge VAT to my tenants?
In principle, residential rentals are exempt from VAT. However, if you offer hotel services as a landlord as part of holiday rentals during your guests' stay, you will have to charge 10% VAT on top of the rent.
Hotel services include, for example, cleaning during the stay, changing bed linen and/or towels during the stay, filling refrigerators, permanence of a customer service desk, provision of parking, safe services, general concierge services, etc. Also reservation and calendar services, for example, a reservation through a platform such as Airbnb, is considered a hotel service.
The following services are not considered hotel services:
- cleaning services before check-in and after check-out;
- change of bed linen and towels before check-in and after check-out;
- cleaning of the common parts;
- repairs to and in the property during a tenant's stay.
Charging VAT not only increases the cost price for your tenant, you will also have to file periodic VAT returns. This is an additional administrative burden for you. Therefore, it will not be interesting for the usual second residence landlord to offer hotel services.
There is no VAT exemption for small businesses in Spain, as there is in Belgium, for example. If you have less than €25,000 turnover in Belgium, you can enjoy a VAT exemption for small businesses. In Spain, this regime does not exist. This means you will have to charge VAT for holiday rentals with hotel services.
Currently, the European Commission is working on a legislative initiative to Require rental platforms to collect VAT directly when booking accommodation. The aim is to achieve administrative simplification for landlords while collecting more VAT. These new regulations are expected to be ready by 2025.
What if family members are staying in your home?
Then it depends on whether your family members pay for the use of the property. As soon as they pay an (expense) allowance, you are taxable. If they do not pay an allowance, or the allowance is lower than the cadastral income, you will be taxed based on the cadastral income as if you were not renting out the property.