Spanish Holiday Rental Taxation for non-resident Landlords

The beginning of 2018 saw fresh changes to the way in which buy-to-let landlords are being taxed in Spain. Not paying your taxes is no longer an option – you could be facing huge fines, when the Spanish Tax Office (AEAT) finds out you are letting your property, whether you are resident or a non-resident landlord, and fail to report your rental income. A tax advisor or accountant will be able to tell you, just how much you can save in tax with the latest changes in taxation rules. Broadly speaking, the changes are these:

You will qualify for landlord tax relief, if you are a resident of the EU or wider EEA area. You must attain a tax residency certificate from your home country, to prove that you are tax payer in that country, and a non-resident landlord in Spain. Why?

On 1st January 2018, the Common Reporting Standard, of CRS, came into force in Spain. More than 100 countries in the EEA singed up to the CRS agreement in an effort to reduce tax evasion. In essence, there will now be an automatic exchange of fiscal information between these countries on individual taxpayers.

The United Kingdom and Spain have both signed up to CRS, which means that both countries’ tax authorities will be automatically aware of your taxable rental income. If your rental income is derived from Spain, that’s where you will be taxed. Your Spanish bank should have written to you at the start of the year with a request to disclose your tax information. Not doing so could result in the closure of your account.

Whether you rent out your Spanish property directly to holiday makers or let it via tourist sites like Airbnb, the Spanish tax authorities are now in a position to find out and fine you heavily, if you do not report your taxable rental income. The American giant Airbnb was finally forced to sign an agreement with the Spanish tax authorities, and similar tourist accommodation websites are also forced to sign such an agreement, as the Spanish Tax Office is cracking down on illegal lettings, and passed a new law on holiday lettings intermediaries, which came into effect in June this year. Such intermediaries are now forced to report to the tax office on property identification, landlord’s rental income from the days let out etc. If the letting intermediaries fail or refuse to report, they can be fined up to 600,000 euros.

In an effort to discover landlords who fail to report their rental income, tax authorities now regularly trawl tourist accommodation websites with specially designed software, as well as places like Facebook and other social media sites, where private landlords advertise their holiday rentals.

With the help of an accountant or tax advisor/lawyer, you should be able to reduce your non-resident landlord tax bill by at least 40%, if not more.

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