Taxes on a holiday rental in Spain: a guide for owners

How you file taxes on a holiday rental depends on how the home is run and the services you provide. When the owner simply lets the property without offering hospitality-type services, the income is usually declared under IRPF (Spanish personal income tax) as income from real estate capital, deducting only the expenses that are tax-deductible. (Agencia Tributaria)

How to declare your income, work out your deductible expenses and know when VAT applies.

If you feel overwhelmed by the complex tax rules surrounding how your holiday property is taxed by Hacienda (the Spanish tax agency), you've come to the right place. In this blog post we set out to make the process of declaring income from your holiday home as simple as possible.

To begin, let's look at the most common scenario among our clients: you own a house or flat that you rent out through platforms such as Airbnb or Booking, you clean before and after each stay, and you may have a company like beBalmy handling all this for you.

In this context, we are talking about a home subject to IRPF (Impuesto sobre la Renta de las Personas Físicas) without hospitality services. In other words, you don't provide hotel services such as daily cleaning, room service or concierge. In this case, the income counts as income from real estate capital.

What do I have to declare?

Once we've identified which category we fall into, it's important to understand exactly what you have to declare. To work out the exact amount, you will need to subtract all deductible expenses from your gross income; we detail them in the next section. Because it is a holiday home, your property is unlikely to be let for all 365 days of the year. So when we look at deductions, we will distinguish between the days it was let and the days it was empty.

Income minus deductions. Anything else?

It is also important to declare the time your home was not let. 

Bear in mind that for the months the home was empty, Hacienda may attribute deemed income to you. This is because it considers that you could have earned income during that time, even though you chose not to. It is debatable whether this should only apply to periods when you decided not to let it (for example, if you only let it in summer) and not to periods when it was listed but not booked. For now, though, Hacienda doesn't seem to make that distinction and will probably use the total period of non-occupancy in the year, whatever the reasons.

To calculate this deemed income, you apply 1.1% or 2% of the cadastral value, depending on your home's year, divide it by 365 days and then multiply it by the time it was empty.

Deductions and deductible expenses

Now for the most important part: all the expenses you can deduct. As we said, it is crucial to distinguish between the days the property was let and the days it was empty.

Expenses deductible according to the occupancy percentage:

• Municipal taxes and charges, such as IBI (Impuesto sobre Bienes Inmuebles, the local property tax) and the refuse collection charge.
• Essential utilities such as electricity, water, gas and internet.
• Insurance premiums, including the home insurance policy.
• Finance costs related to loans to buy or renovate the home.
• Comunidad de propietarios (owners' association) fees
• Depreciation of the home and furniture, limited to 3% for the home and 10% for the furniture.

Expenses deductible at 100%:

• Management and administration fees, such as those paid to lawyers, accountants or management services such as beBalmy.
• Personal services provided by third parties, such as cleaning, laundry or gardening.
• Insurance specific to renting, such as public liability insurance.
• Advertising and promotion costs, including the commissions of booking platforms such as Airbnb or Booking.com.
• Maintenance and repairs needed to keep the property in good condition, excluding extension or improvement works.

Keep reading:

• income tax returns for holiday home owners
• single register for holiday homes
• SES Hospedajes

Conclusion

In short, although filing taxes for holiday rentals can be complicated because of the variety of tax rules and the need to calculate income and deductible expenses, keeping accurate records and meeting your tax obligations not only keeps you within the law but also prevents possible penalties and future disputes with the tax authorities. And remember: it is crucial to keep a detailed record of your figures and invoices to properly back up your expenses and deductions!

Need help managing your holiday home? Contact us through this form, or send us a WhatsApp message.