Now that you’re a property owner, it’s time to think about which rental system is best for you.
As of the date of this article, there is a Double Taxation Treaty in place between the UK and Spain so you should not have to pay tax twice on the same income.
Where you file your tax return depends on whether you are a resident or a non-resident. If you are in Spain for more than 183 days during the calendar year, or if you have established, directly or indirectly, the main center of your business or economic interests in Spain, you must file your tax return in Spain.
In Spain, if you are a resident, income from the rental of a house or apartment is subject to IRPF (Impuesto sobre la Renta de las Personas Físicas), that is the Spanish equivalent for the personal income tax. Depending on the type of rental contract, income is taxed in different ways.
Long-term rental
Although rental income is often lower than for seasonal rentals, long-term rental income is tax-advantaged. Long-term rental income is taxed at a rate of 60% of rental income, plus you can deduct current expenses (bills, repairs, home insurance, etc.).
A long-term rental contract means that your property will be rented out on a very stable basis, with no major problems.
This is how the tax base for conventional property rentals is determined:
Seasonal rentals
Seasonal rentals are short-term contracts generally lasting between a few days (a minimum of 32) and a few weeks. Spain is a very popular tourist destination, with high demand from both Spaniards and foreigners, and a very rich and dynamic property stock.
Taking advantage of the Spanish real estate market, this type of contract allows you to earn higher revenues. It’s (also) a very good option for many property investors who turn to this type of investment.
As with conventional rentals, short-term seasonal rentals allow you to deduct the current costs mentioned above. However, it’s important to bear in mind that only expenses incurred during the period when the house or apartment is being rented out can be deducted.
Although seasonal rentals are more profitable, it is essential to bear in mind that the 60% reduction on rental income has been, for several years now, reserved exclusively for long-term rentals. It will therefore not be possible for the owner of a seasonal home to reduce his or her tax bill through this route.
Before embarking on a property purchase project, it’s important to be well advised on the possibilities available. And if you’re looking for a property to live in, it’s also important to know the options in case your circumstances change and you move to another location, then you could rent the property in one of the very stable options offered by Spanish rental legislation.
Remember too that we will manage your rental for you if you wish.