How to Do Your Holiday Rental Tax Return in Spain in 2024
Get the lowdown on making money from your property while staying on the right side of the law
- Holiday rentals have had to comply with the regulations of the Tax Agency and the autonomous communities since 2013.
- Rentals with services pay 10% VAT, while those without services might be subject to Transfer Tax, and all must pay income tax.
- If you own just one property, you can handle your own taxes, but if you have multiple properties, you’ll need a tax advisor.
- Failing to declare income can lead to hefty fines, and meeting your tax obligations boosts guest trust.
August 2024
One of the biggest worries about holiday rental property owners is paying taxes and filing a spotless, error-free tax return. If you own a holiday home, you’ll need to declare it as such and pay various taxes, specifically VAT, income tax, and business tax. What are these taxes and what do you need to do? We’ll break it down in the following article. Let’s dive in.
What Legally Constitutes a Holiday Rental?
To stay within the law, the first thing we need to do is find out if our property is considered a holiday rental. According to the Tax Agency (popularly known as Hacienda), a house or flat is officially a holiday rental if: there is a temporary transfer of use of a fully furnished and equipped home ready for immediate use, marketed or promoted on tourist channels, and done for profit. This definition is crystal clear; if we have a commercial-intent and the property is set up for holiday use, it is legally a holiday rental.
Until 2013, flats and houses for rent had to follow the Urban Leases Act; but that year everything changed. A new law was passed transferring the regulation of holiday rental properties to the autonomous communities, so if you need to know the legal framework, you’ll have to check the website of the relevant authorities in your autonomous community.
Heads up, because some of these autonomous communities, like Andalusia, have given local councils the power to set rules and limits on holiday homes, as long as they do so in the public interest and within their urban planning powers. Holiday rentals have boomed in recent years, and in some areas, councils have had to step in to ensure this growth happens in a stable and orderly way.
What Are the Types of Holiday Rentals?
To pay the right taxes, the first thing is to determine our tax obligations. These depend on the type of holiday rental we offer to guests.
There are two types of rentals you need to choose from:
- Rental with hospitality services. As the name suggests, these are properties that offer guests personalised service and various amenities like meals, cleaning, or tour guides, among others. They are more than just accommodation, which is why you must pay 10% VAT on each service. Also, to offer your flat, house, or villa for rent, you’ll need to register in the Economic Activities Census under group 685, and only if you exceed a million euros will you have to pay business tax. Be very careful with the categories you mark as confirmed, as they will be crucial when determining your payable amount.
- Rental without hospitality services. This type of rental is different. It offers only the accommodation, and the guest is responsible for cooking, cleaning, and other details during their stay. It’s a more independent model and, therefore, does not include VAT, although you might have to pay Transfer Tax depending on the case. You also won’t pay business tax or need to submit any forms to the authorities.
As a rental without services, you can also deduct various fixed costs as a landlord, such as repairs, community fees, rubbish collection tax, property tax, or advertising.
Are those all the taxes? No. We’ll explain; in either case, you must pay income tax (IRPF), depending on whether your situation is classified as real estate capital or as economic activities carried out in the property. Either way, you’ll have to pay up if you want to meet the tax obligations for a holiday rental.
Knowing all the taxes you must pay, you can plan the fiscal year in detail to balance your accounts and cover expenses on time. Understanding the legalities is also key to ensuring accurate planning.
Self-Management or Professional Advice?
This is one of the big questions for owners. The answer is simple; if your holiday accommodation is unique, offers basic facilities, your bookings are moderate, and you’re good with numbers, you can probably handle all the paperwork yourself. Just be adept in the digital environment, keep a meticulous record of guest check-ins and check-outs, and know all your financial obligations.
If, on the other hand, you have several holiday accommodations, a high volume of tenants, and limited time, it might be best to use a specialised tax and financial advisory service. This will help you stay on top of all your obligations, save time, optimise your tax deductions, and give you peace of mind at the end of the month. However, you’ll need to invest some money each month in these services.
Heads up: you’ll need to declare the income earned in your annual tax return. So, whether you have professional advice or not, we recommend keeping detailed records of your income and expenses as a landlord. You can use specialised software or apps for managing holiday rental finances. There are various options available that can save you time and money.
What Happens if I Don’t Pay Taxes on My Holiday Rental?
We don’t recommend it. Firstly, because it’s ethical to pay taxes on an activity that should be declared and whose payment can help improve the sector. Secondly, because the Tax Agency is ramping up controls. In the last decade, holiday rentals have surged, and with this boom, many irregular rentals have been detected making many legal errors.
Hacienda imposes significant fines that can reach 100% of undeclared money, depending on the severity of the offence. If you have any doubts about the taxes you must pay, you can always book an appointment at the Tax Agency offices in your autonomous community, explain your case, and ask for advice.
In any case, a holiday rental that meets its tax obligations is one that inspires trust, and this will be valued by guests. At Holidu, we can always advise you on placing your property in the holiday rental market. Contact us.