Like rental properties, rental premises in Spain are subject to taxes. As a result, your net earnings from letting premises form part of your annual income and must be declared in your tax returns. In addition and unlike rental properties, premises have the added complication of IVA (VAT) and retentions. To find out more, read on to discover the main aspects of taxes on rental premises in Spain.
Read about taxes on rental properties in Spain.
What are rental premises?
Premises are property used by someone for a business activity, such as a shop or office. No one lives in the premises.
What are my tax obligations as a landlord of rental premises?
You must do the following:
- Sign up as a landlord with the tax authorities. This is because you are providing a service and are therefore liable for IVA. You sign up via form 036 or 037 depending on whether you have any other business activities.
- Issue monthly invoices that include IVA.
- File quarterly IVA returns (Modelo 303).
- Include all rental income in your annual tax returns.
What about IVA on rental premises?
IVA is a complicated subject and it’s always best to take professional advice to avoid expensive mistakes. If you’re renting out premises, this is what you should bear in mind:
- Rental premises in Spain are subject to IVA at a flat rate of 21%. So, if the rental rate is €1,000 a month, you must charge the tenant 21% in IVA (VAT) on top (€210 in this case).
- You must present your tenant with monthly invoices that include IVA.
- Your tenant must pay you the amount corresponding to IVA at the same time as the rent.
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What about tax on income from rental premises in Spain?
Under Spanish law, the tenant of the premises deducts 19% from the rental rate and pays it to the authorities as tax on your income from the rent. So, for example, if the monthly rental rate is €1,000, the tenant will deduct €190 and pay this to the tax authorities leaving you with a net €810.
This monthly deduction goes towards the tax you are due to pay on your income from the rental premises.
Am I entitled to deductions for IVA?
Yes, when you file your quarterly returns for IVA, you may compensate the amount paid for the rental with IVA you have paid on expenses such as utilities and repairs.
What about deductions for income tax?
Money you receive from letting premises are deemed to be part of your tax income, but first, you deduct eligible expenses. These include:
- Interest on loans for the purchase or refurbishment of the premises.
- Costs of maintenance and repairing the premises.
- Costs associated with the purchase of the premises such as transfer tax and legal fees.
- Council tax.
- Community fees and utilities if you pay them, not the tenant.
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Are there any deductions for long-term rental of premises?
No, the Spanish tax regime does not offer any further deductons.
Can I claim for expenses if the premises are empty?
Yes, you can as long as no valid contract is in place.
How much is tax on income from rental premises?
The same rates for income from employment apply and depend on your residence status:
Residents in Spain – 19% to 47%.
EEA non-residents in Spain – a flat rate of 19%.
Non-EEA non-residents in Spain – a flat rate of 24%.
Where can I get help with taxes in Spain?
Our expert team offers assistance with all tax matters in Spain for residents and non-residents. Get in touch to find out how they can help you avoid expensive mistakes and stay on the right side of the taxman.
Maria Luisa Castro
