You want to rent your apartment or villa, or you want to make a rental investment in Spain. So you have three options: traditional 3-year rental, temporary rental and tourist rental. Which one is best for you? What are the contractual and fiscal differences between these three rental options?
Renting the property you have acquired in Spain allows you to make this real estate investment profitable. And to pay all or part of the expenses related to this property (property tax, condominium fees, mortgage credit …). The tax elements presented below concern only natural owners.
This is the traditional rental between an owner and a tenant. In Spain, it obeys the 2013 Law on rentals (ley 4/2013). There is a strong demand to rent (1) large apartments in the centers of large cities, such as Madrid and Barcelona, from foreign expatriate customers, and (2) small apartments on the outskirts for Spanish customers.
Legal rental period: 3 years
The duration of the leases may be less than 3 years.But expiring, it extends automatically one year until reaching the legal 3 years. Once these 3 years are reached and if neither party, owner or tenant, withdraws, the lease agreements are automatically extended by one year, and so on.
Nevertheless, after one year, the landlord can recover the housing to make it his main residence (for him, his spouse or his children), provided that he has informed the tenant two months before.
If necessary, you can use or refer to this Rental Agreement type.
The legal clauses of the lease agreements
- The transfer or partial subletting is possible but with the prior agreement of the owner, and if the price of the sublease does not exceed the price of the rent
- The work in the housing can be done by the tenant but with the prior consent of the owner
- The owner can ask for up to 2 months deposit
- The monthly payment deadline for the current month is normally set before the 7th of this month
- If the owner does heavy work, he can increase the rent up to a limit of 20% (unless otherwise stated in the contract)
- It is advisable to specify the completion of an inventory at the entrance (take a picture of the different rooms of the apartment and attach them to the rental agreement) and when leaving the tenant
- The owner may impose a ban on the presence of pets
- The tenant must ensure the restoration of the housing at its exit (and in particular to carry out painting work)
- The deposit can not be used to pay the last rents
A written agreement at the end of the lease
When the tenant leaves the accommodation, it is safer to have a written agreement, especially to mark the final date of rental and delivery of housing. It is also necessary to annex the inventory of the housing at the exit, to specify the remaining obligations (remainder of electricity bills for example), and to establish the terms of refunding of the deposit (after deduction of possible expenses). Attention, the owner has a period of one month for the refund of all or part of the deposit; after this period, he will have to pay a legal interest to his ex-tenant.
And if you sell your home when it is rented
The owner has the right to sell his property even if it is rented. In this case, the rental must be registered in the property register (“Registro de la Propiedad”) before the sale, and this for the good continuity of the rental. If the registration is not made, the new owner may demand the end of the lease and the tenant will still have the right to stay in the house for a maximum of three months.
An improved and advantageous tax system
The classic rental has a double non-negligible tax advantage (that temporary rentals and tourist do not have):
- the costs (interest on loans for acquisition and for major works – facade renovation for example, IBI property tax, condominium fees, insurance, works and maintenance costs, …) are deductible from the gross rental income, but only for resident owners of the European Union (plus Iceland and Norway).
- and on these net incomes, there is in addition a reduction of 60%, but only for the resident owners in Spain.
Of course do not forget your annual declaration whether you are resident or non-resident in Spain. If you are a Spanish resident, you will have to present these resources in your Personal Income Tax Return (IRPF); it will be your net rental income after deduction that will be declared. If you are a non-resident, you are subject to the IRNR (Non-Residents Income Tax) and you will be taxed at 19% on your net rental income for EU residents (plus Iceland and Norway) and 24% for others. Still for non-residents of another EU country, these incomes are exempt in their country but they must be declared for the taxation of their country’s income according to the effective rate method.
Temporary rental (“alquiler de temporada” in Spanish) is often used with certain clienteles: employees to be accommodated a few months, students from September to June, people following a medical treatment, etc.
The legal conditions of temporary rental
To be acceptable, temporary rentals must comply with a number of legal conditions:
- The temporary rental apartment can not be the main residence of the tenant; the habitual residence of the tenant must also be specified in clear in the lease agreement
- There must be a valid reason not to rent the dwelling under the normal lease; for example, workers who need housing for the time of a construction site, students who take courses, people in need of medical treatment or their escorts, etc. This reason must be clearly stated in the rental agreement.
- As a result of the foregoing, a contract termination date must be agreed upon and recorded in the contract, it can not be extended and must coincide with the aforementioned parameters: work to be done, school year, medical treatment, etc. Rental times are generally between 3 and 15 months.
- The title of the contract must be: “Contrato de arrendamiento de uso distinto a vivienda”
The peculiarities of temporary leases
The deposit is two months.
The lease is valid for the period specified in the contract: neither the owner nor the tenant can return this period. A tenant who would like to leave before the end of the contract will have to pay all rents until the end of the contract. An owner can not recover his home before the end of the contract.
The energy certificate is mandatory to rent a property for a period longer than 4 months.
The temporary lease is not governed by any law, but by the clauses agreed between the tenant and the lessor in the lease. So before renting, be very careful with the drafting of the contract.
Taxation of temporary rental income
Renting temporarily is more taxed than conventional rental: the resident owner does not benefit from the 60% of allowances. Temporary rentals are taxed on the net rental income (rents from which the fees and charges are deducted over the rental period) for the resident owners of the European Union (plus Iceland and Norway) and on the totality for the others.
As with normal contracts, homeowners must file an annual tax return. If you are a Spanish resident, you are subject to the IRPF. If you are a non-resident, you are subject to the IRNR and you will be taxed up to 19% on net rental income (with reporting obligation in your country of origin) for resident owners of the European Union ( Iceland and Norway) and 24% for others.
83 million tourists stayed in Spain in 2018, a new historical record. And they spent 90 billion euros! They do not all stay in hotels or campsites. Far from it, since since 2016, the capacity of reception of the tourist hirings of Airbnb and others in Spain is superior to the hotel capacity. For two years, municipalities have responded by limiting the proliferation of “pisos turisticos”,(Tourist Apartments) but about 400,000 tourist beds are offered in apartments or villas. And if you are an owner in Spain, you are certainly one of those who rent their villa or apartment on sunny days.
A profitable activity in summer
Renting is a very profitable activity but especially in summer and in coastal areas. For some destinations especially urban, Barcelona in particular, it is an activity that is interesting beyond the summer. The average annual income per unit rented in Spain on Airbnb is 3600 € for a total duration of 36 days rental (the average duration of a rental is 4 days).
The most popular tourist rental destinations are in descending order of importance:
The tourist license, the key to rent
The duration of a tourist rental can not exceed 31 days.
To rent your apartment or villa, you must first have a tourist license that you must ask the Autonomous Community of the location of your home. Obtaining this license has become more complex and it is now necessary to fulfill conditions related to urban planning rules (direct access from the street for example), facilities (wifi or air conditioning), services offered (availability of tourist information on the area, presence of a book of claims) or condominium permissions. Not to mention the reception of the customers, the cleaning of the premises, the availability in the event of problems, the management of advertisements on Internet, etc.
Do not forget also that in some areas of the most tourist cities, such as old Barcelona, new tourist licenses are prohibited or frozen.
Be careful, if you rent without a license, it is at your own risk. In Barcelona for example, this offense can cost you between 6.000 and … 600.000 €!
Tax returns mandatory!
Since this year, all Internet tourist rental platforms are required to declare all rentals. So do not try to escape the tax if you rent through them, it’s impossible!
So when and what should you declare to the Spanish tax office? It depends on your situation.
If you are resident in Spain, you will make your declaration when you write your IRPF (the tax on income of residents in Spain). You will have to report your net income, which is the income minus the tax-deductible expenses (and in addition limited to the occupation time). The 60% rebate for rentals (provided for in section 23.2 of the IRPF Act) is not applicable because they are short-term rentals and not permanent rentals.
If you are not resident in Spain, you are required to make a quarterly return even if you have not rented anything for a quarter! These incomes are considered and taxed like “rendimiento of immovable capital” (return of the real estate capital). The income to declare is the total of the receipts, with the possibility of deduction of the expenses or expenses envisaged in the IRPF (limited to the durations of hiring) if the renter is resident of the European Union (more Iceland and Norway). The tax rate is 19% for EU residents and 24% for others.
AT YOUR DISPOSAL
Real estate advisers, assisted by our lawyers specializing in real estate law, we are at your disposal to make declarations to the Spanish tax authorities. To do this, send us an email to email@example.com. We can also assist you in case of regularization of your situation for the year 2018. Finally, do not hesitate to contact us in case of problems with the Spanish tax authorities.
With more than 20 years of experience in real estate acquisition procedures in Spain, we are at your disposal to assist you with all the necessary steps from the search for a property to services offered after the acquisition. When you are buying a home in Spain we help with organizing the visits of properties, the legal verification of the properties, the obtaining of a mortgage, the administrative procedures and the signature of the different notarized documents.
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