Often many distressed people moan how the taxation on holiday letting is convoluted and scares them off. Fortunately, that is lawyers and economist step in, simplifying matters.
Non-resident landlords can now benefit from generous tax relief which used to put aside exclusively for Spanish resident taxpayers. these new laws have had an outsize impact in taxation, considerably reducing non-resident landlord's tax bills.
Few tax advisers are actually taking advantage of these changes in non-resident taxation or else intentionally ignore them, this translate into their clients facing large tax bills which could have been legally avoided if some care and diligence had been put in.
Who qualifies for landlord tax relief?
- You are EU/EEA-tax resident
- You can attain a tax residency certificate from your home country
New changes to non-resident taxation
The Spanish taxman knows you are renting. Three important changes in taxation took place in 2018, don't make the clear mistake of underestimating the Spanish tax office (AEAT) thinking it is unknown of your rental income business. Spanish tax office is taking measures on taxpayers, both resident and non-resident, who fail to fail and report their rental income.
1. Common Reporting Standard (CRS)
Over 100 countries signed an agreement to combat tax evasion, this agreement becomes effective in Spain in January 2018. It has a hallmark the automatic exchange of fiscal information between countries on taxpayers.
Signatory countries no need to formally request information on taxpayers, they receive it automatically. Both the United Kingdom and Spain have both signed it. This tax on rental income should have been declared and paid in Spain, not in your home country. As a result of the CRS, you may have received earlier on this year letters from your Spanish bank asking you to reveal tax information or else threatening you to block your accounts in Spain.
In a few words, your home country is busy informing the Spanish Tax Authorities and vice versa, on your tax matter.
2. Full disclosure agreements signed in 2018 between the Spanish Tax Office and property portals (AirBnb)
The US giant AirBnb finally yield in and agreed on signing a full disclosure agreement with Spain's Tax Office.
3.10 Tax Office
These new terms apply to all properties located within Spanish territory. It's doesn't matter if you sign an agreement in the UK, it is the Spanish terms that are applied because the properties are located in Spain.
In summary, AirBnb will tell the tax office everything they need to know, the tax office will be able going forward to calculate how much back tax you owe on undeclared rental income. This exchange of information begins ends of 2018/ early 2019 backdated to May 2018.
If you haven't been declaring and paying tax on your rental income in Spain, you should advance fines, delay interests and surcharges by coming clean and filing taxes before the Spanish Tax Office is on to you.
3. Tax form 179
Last month, we saw the creation of the new quarterly tax form 179. This form creates the obligation for holiday letting intermediaries. to report to the Spanish Tax Office on a quarterly basis. They will supply all relevant information to the tax office on property identification, guest details, landlord's rental income, number of days hired, a method of payment, etc. Non-compliance by letting intermediaries has associated fines that range from 20€ to 600.000€.
Non-payment: Tax Office penalties
The Spanish Tax Office announce warnings to over 134.000 property owners advertising holiday lettings over unpaid tax. Fines for non-payment of tax on rental income range from 50 to 150% of the undeclared amounts plus delay interests.
The AEAT can collect taxes dating 4 years. These fine are in addition to those levied by Regional Tourist Authorities on unlicensed holiday rentals.
Regional Tourist Authorities: attain a holiday rental license
Several regions across Spain, have enacted holiday home laws over the last years, all these regions require you attain a tourist rental license if you don't want to be fined for leasing illegally to tourist.
The regional fines for non-compliance are steep across the board, reaching 6 figures in most cases. Keep in mind that these huge fines imposed by Regional Tourist Authorities are totally unrelated and in addition to those imposed by the Spanish Tax Office on any undeclared rental income. If you plan to offer your property out as a holiday rental you should first register it and attain a Tourist license from you Regional Tourist Authority.
Non-resident Landlord Tax Obligations
Non-residents landlords are liable for the following two set of taxes, depending on whether you rent out or not.
Your lease your property: Non-resident income tax (NRIT)
On owning property in Spain and renting it out, whether long o short term, you need to file a quarterly tax on your rental income. One tax form needs to be filed for every joint owner.
Not rent out your property: Non-resident imputed income tax (NRIIT)
Paid once a year
Even if you don't rent out your property in Spain, regardless, non-residents still need to file once a year this tax. Also, on the days you don't rent out your property in Spain these are taxed as imputed income on a pro rat.
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