Only about 75% of the property owners actually report these earnings to Treasury in Spain. You must be aware that it is mandatory to include the income from holiday rentals in your income tax or otherwise, you are exposed to penalties from the tax office.
In Spain each autonomous community must regulate the new Law of Vacation Rentals and may vary the minimum periods of stay, or avoid renting some rooms in the house among other things.
Until then there are two ways to declare the income of holiday rentals: As “second home” or as “tourist accommodation”.
- The second house is the most often used option to avoid the paperwork, here the rental is not considered as a rental residence and the lease would be used for other than permanent residence including the income in the 2015 statement. But before that, we must differentiate between the periods when the house is rented and when is not for the purposes of income taxes. The income from renting will determine the final profit and may deduct all the costs associated with the commissioning renting property such as property tax, home insurance, garbage or community fees, etc. You can even add the money you’ve spent on advertising the house in sites such as Your.Rentals. Remember that from the IBI (Spanish Property Tax) you can only declare the corresponding proportional months of the holiday rental, and the same applied proportionally to the other expenses of the property. Please also note that you must pay taxes for the time that the property is not rented: 1% or 2% (depending on whether the value has not been revised since 1994). The result is divided by 12 months and then multiplied by the number of months that the house has been rented.
- Tourist accommodation: perhaps the most relevant option (the new law persecutes the holiday houses that doesn’t use this method). To do this you must initiate procedures such as the house registration under the name of tourist accommodation in the registration office of the autonomous Spanish community and even sign up in the business tax to execute the activity. In practice, it means that you must issue an invoice for each stay applying the VAT, (now 10%). Therefore make quarterly VAT return including the income earned and stating the VAT, then subtracting the VAT from deductible expenses, which will be related to the activity itself. To be registered as an independent, you must pay quarterly income tax, if indeed you are into this modality.
You can also deduct expenses in the income earnings statement.
In the Canary Islands renting vacation properties it is subject to IGIC – canary VAT- and is not excluded. You must charge VAT on invoices and declare it quarterly. In the same way an invoice for each stay will be issued. To do this you must be registered in the Business Tax Office (Hacienda) under the heading 1.685 concerning non-hotel tourist accommodation.
When not renting the property
While rental property is empty, you must include it as an imputation of income in that period. Treasury (Hacienda) requires taxpayers to pay their non rented property taxes, establishing an hypothetic economical return, creating revenue just because, and corresponding to 1.1% of its assessed value.
The penalties for not declaring finance are in the table below and also will force to provide a supplementary income tax return declaration that includes such income plus a proportional service charge for the elapsed time.