Rental property is in demand and many investors are making their money work for them by purchasing property to rent. It’s important that if you do, you take the time to ensure that legal requirements are met. In this article Susan Partridge from our Fiscal Department explains what these are and how you can comply.
Perhaps you have some cash to spare and would like to use it. With interest rates as they are, many people prefer to invest in something rather than keep their money in a savings account. Buying a property for rental has become a popular investment choice. There is plenty of demand both for tourist rentals and for people who want to rent long term. The ways in which you can advertise your property have also increased. Online alternatives, such as Airbnb, have become a popular alternative that makes renting out your property even easier.
However, there are some rules and regulations when it comes to renting out your property and you should familiarise yourself with these before taking the decision to rent.
Who is staying there
You must let the Guardia Civil or Policia Nacional know who is occupying your rented property. If an agency handles your rental then they should do this as a matter of course. The Spanish police need to know the identity of every occupant over the age of 16 years old who is renting out property in Spain.
You should let them know the details of each tenant including:
- First name and surname
- Identity document reference
- Date of birth
- Date of occupation
You also need to include your own details including ID, name and surname of the owner or manager of the property. The form must be signed by the responsible person.
Paying rental tax: non-residents
When you rent out property in Spain as a non-resident you are required to declare your rental income on form 210 every quarter. The quarters 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
Your declaration has to be made before the 15th and the Tax Office charge your bank account on the 20th. There is an extra charge for this service of €50 each quarter which is tax deductible.
Each quarter you must submit:
- the names of the tenants
- dates of occupancy
- the amount paid
- costs incurred (if you are resident within the EU, Norway or Island)
- the rate for the rental income tax is 19% in 2019 for residents within the EU, Norway or Island and 24% on the gross income for residents outside these areas.
Of course, a tax adviser, such as Ábaco can help you with this process and ensure that the correct information is submitted each time.
Paying rental tax: residents
If you are a resident who is declaring income on a second property then you should declare it in your annual income tax declaration which is made before the end of June.
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, Norway or Island.
Costs that can be deducted include:
- council tax
- community charge
- house insurance
- mortgage interest
- legal costs
- cleaning 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.
It makes sense
Renting out your property is a good option that means you can earn from your Spanish property either on a temporary bases or as a permanent investment. Either way, just make sure you have fulfilled your legal obligations and enjoy that extra bit of cash your property can provide.