Invest in Spanish rental property: What you need to take into account

Last updated on March 13th, 2023 at 04:24 pm.

Investing in Spanish property has become a profitable and popular alternative. However, it isn’t just a case of advertising it in Airbnb. There are implications that you should be aware of when renting out a property in Spain

Making the decision to invest in Spanish property

So, you’ve decided to advertise your property for rental. Perhaps you wish to generate some income and you bought the property as an investment. Perhaps your circumstances have changed and you are no longer able to use a holiday home yourself or wish to subsidise the times that you do. Whatever your reason, renting out your property in Spain can be a good idea. 

However, it does come with implications. As you would expect it’s not just a case of putting out your advert and waiting to see what interest it generates. The rise in the number of people renting property in Spain and the use of online advertising has come to the notice of the Spanish authorities. Below we highlight the duties in relation to property rental that you really should be aware of. 

Your duty to inform 

Whether it is a long term or a short term let, you must inform the Guardia Civil or Policia Nacional about who is staying in your property. The Spanish police need to know about every occupant over the age of 16 and it is your duty to report this. If you are using a rental company then the practice of doing this can be delegated to them. 

The information that the police require includes: 

• The first name and surname of the occupants 
• Identity document references 
• Dates of birth 
• Sex
• Nationality
• Dates of occupation

You will need to include your details such as your name and surname, ID (passport number or NIE) and you will have to sign the form too.

Your duty to pay taxes

Whether you are a Spanish resident or a non-resident, the rental paid to you is a form of income that must be declared to the Spanish Tax Authority. 

Non-resident responsibilities 

If you are a non-resident then you must declare your rental income on form 210 every quarter. The dates are:

• 1st Quarter (January, February, March) – Tax payable before 20th April 
• 2nd Quarter (April, May, June) – Tax payable before 20th July 
• 3rd Quarter (July, August, September) – Tax payable before 20th October 
• 4th Quarter (October, November, December) – Tax payable before 20th January

You have to make your declaration before the 15th day of the month and the Spanish Tax Office will take your money from your bank account on the 20th. You must also submit information to them about who is occupying the property. This includes the names of your tenants, the dates they are living there and how much they’ve paid. 

The rate for the rental income tax is 19% in 2019 for residents within the EU, Norway or Iceland. For residents of other countries the rate of tax on gross income is 24%.

For any time that you are not renting out your property as a non-resident you must pay imputed income tax. This is applied on second homes and non-resident homes in Spain. It is a nominal tax that property owners pay if they do not rent out their property because, in theory, they could.

If you only use your property a few weeks during the year and rent it out for the rest of the time, then you will have a combination of rental tax and imputed income tax to pay.

To ensure that this process runs as smoothly as possible, consider hiring a tax adviser like Ábaco. The benefit of an independent tax adviser is that they offer guarantees that tax returns are submitted correctly and timely.

Resident responsibilities 

If you are a resident then your rental income is declared annually as part of your resident tax declaration that must be completed before the end of June each year. The Spanish tax year runs from January to December of the previous year so you will declare the rental income received from January 2018 to December 2018 in April/ June 2019. You can also deduct expenses like those mentioned above, against the income you receive. 

Deducting for expenses 

The good news about rental income tax is that both residents and non-residents of Spain can claim expenses against any income that’s been earned. This is provided you live in a country that is a member of the EU community or of the European Economic Area. 

Costs that can be deducted include: 

• Council tax 
• Community charge 
• Utilities
• House insurance 
• Mortgage interest 
• Legal costs
• Leaning and laundry

You should set up a system for keeping record of these expenses. They can soon mount up and make a difference to your tax bill each quarter. 

Invest in Spanish property: Get the help you need

Some residents in coastal areas return to their native country during the hottest months and rent out their property in Spain to holiday makers. This can be a very good source of income as properties, particularly with their own pool, can command very high rents at these times of the year.

However, if you take advantage of the opportunity to invest in Spanish property, remember that you are also responsible for declaring this income. You are at risk of incurring fines and sanctions if you don’t. 

These responsibilities may seem a little daunting at first but ensuring that you meet them puts your mind at rest and could save you from getting on the wrong side of the authorities in Spain. 

At Ábaco Advisers, our team of experienced fiscal and taxation advisers can help you make sure you meet your responsibilities. For more information, without obligation, you can fill out this form and we will get in touch with you as soon as possible.renting out a property in spain