Do I have to pay taxes when renting a property in Spain?
In Spain, the tenant of a property as a natural person, i.e. private citizen, has not to pay any taxes on the rent. But in the contract might be fixed, that the tenant has to pay fees according to the applicable local tax laws, such as the property tax or the annual fee for waste collection. But this is different if the tenant of the rental property has his residence for tax purposes in Spain.
Do I need a Spanish bank account?
This is not required. However, it is advisable for practical reasons, to open a bank account at a Spanish bank to debit directly the rental, the additional costs and all expenses arising from the rental to this account.
Is it necessary that I apply for a NIE number?
This is not essential for signing a private rental contract. However, all foreign natural persons who meet in Spain an activity of economic importance have to be registered with the Spanish public administration and apply accordingly for a NIE number (Identificación de Extranjero). During the contractual term of the rental contract, it may be necessary to show to the Spanish authority the NIE number when you apply for the supply, such as water or electricity, or when you need to register or to port the supply.
What happens if I need to cancel the Rental Agreement before the contract expiry date?
The rental contract usually includes a specific clause, which defines the end of the rental period to a specified date and the related notice period. In this case, all outstanding payments and expenses incurred up to the specified expiry date have to be compensated by the tenant. If the contract does not contain this clause, the locally applicable rental law (Ley de Arrendamientos Urbanos) determines that an earlier termination can be done legally only after the expired minimum period settled in the contract. The non conformity with the prescribed time limit may have the effect that the owner / landlord can request the full payment of rent arrears for the entire contract period up to the date the contract ends.
What is the difference between a main residence contract and temporary contract?
The difference between a rental contract for a main residence and a fixed-term lease is based on the fact whether the tenant uses the property as a permanent habitual residence or only as a temporary residence. The general legislation for the rental of apartments rather protects the tenants, especially regarding the use of the rental property. However in case of temporary leases for fixed-term periods or seasons (winter, summer, etc..) or periods of less than one year, the tenants rights are less protected, as in this case the parties are authorized to add or to exclude contractually specific paragraphs determined by the locally applicable rental law (Ley de Arrendamientos Urbanos).
Legal Questions Owner
Do I have to pay taxes in Spain when renting out my property? I am a non-resident.
Yes, even a person without permanent residence in Spain, who rent any property in Spain, has to pay every year the income tax for non-residents (Impuesto sobre la Renta de No Residentes) hereinafter IRNR. In the tax return the entire amount of the rental income has to be declared. This amount is taxed in Spain at a fixed rate of 24.75% (2012 and 2013).
In addition, landlords who are resident in any of the Member States of the European Union, are allowed to deduct from their taxable income the expenses and costs associated to the rental.
If the property of a non-resident, which is located in Spain, is not rented out, the non-resident owner must still file a tax return and declare an income, which is estimated at 2% or 1.1% of the cadastral value of the property. The positing of higher or lower percentage depends on whether the amount of the assessed cadastral value was adjusted after 1994. This amount is taxed in Spain at a fixed rate of 24.75% (2012 and 2013).
Do I have to pay taxes in Spain when renting out my property? I am a resident; it is my main residence/ my second residence.
Although it would be technically possible, it is not customary that the main residence of a permanent resident landlord is leased to a person who applies for the main residence in this property, since this object, if it is rented out, would accordingly apply to the landlord as his second residence.
In the case of rental of secondary residences by persons resident in Spain, the income from the rental of the property has to be declared in the annual income tax return (Impuesto sobre la Renta de las personas físicas), named after IRPF.
The taxable income that has to be declared in the income tax return is calculated as the difference arising of the rental income after deduction of the expenses and costs incurred by the owner of the property and associated to the rental. In certain cases, the reduction of the rental amount might be up to 60%. This taxable income is taxed in Spain under the general income tax law, IRPF, at a progressive rate, which is in 2012 in the Balearic Islands between 24.75% and 52% and which depends on the total amount of the rental income of the taxpayer.
If the secondary residence of a person resident in Spain is not rented, the owner of the property has to declare in his income tax return an income value of 2% or 1.1% of the cadastral value of the property, which depends on whether the amount of the assessed cadastral value was adjusted after 1994. This taxable income is taxed in Spain under the general income tax law, IRPF, at a progressive rate.
(How much? Benefits according to age of the tenant) In addition, if the tenant has an age between 18 and 30 years, the reduction of the expenses and costs from the rental amount for the calculation of the taxable income can increase from 60% up to 100%.
Do I have to declare the income from the rent?
If the owner of a property in Spain is registered as a resident, the income from the rental has to be declared in the income tax return, when the total amount of his income including income from employment, capital or other economic benefits exceeds 1,000 Euros. If the owner of a property has no residence in Spain, so he has to declare in any case the rental income in his tax return, as in this case the minimum amount is not valid.
What is the difference between a main residence contract and a secondary residence contract?
The difference between the two contracts is in accordance the same as between a contract with main residence and a fixed-term contract. The locally applicable rental law (Ley de Arrendamientos Urbanos) makes a fundamental distinction between: the rental of a property for permanent residential purposes, i.e. the habitual residence and the rental for other, not permanent, purposes.
What rental period or price qualifies the rental as a touristic or holiday rental?
To qualify the rental as a touristic or holiday rental subject to the law for holiday rental, the rental contract has not to be subject at the same time to the locally applicable rental law (Ley de Arrendamientos Urbanos). Further it must fulfil certain obligations respect to the rental period, i.e. the period may not be longer than two months and the property has to meet following requirements:
In addition, the owner, landlord or the representative has to meet a number of requirements as required by the law for holiday rental, such as the related statements and/or authorities register entries. Further, a complaint book must be present on location and the holiday property has to be regularly offered on the tourism market.
What rental period qualifies the rental as a temporary agreement for non-resident?
The difference provided by the locally applicable rental law to distinguish between fixed-term contracts or holiday rental and rentals for permanent residential use is determinate accordingly to the fact whether the tenant is using the property permanent or temporarily. Therefore, the permanent nature of the use will determinate the nature of the rental contract. In this sense, usually fixed-term contracts are those for one season (summer, winter, etc.) or those for a period of less than one year.