Frequently Asked Questions (FAQ) about the Income Tax on Rentals
1. How much are your fees for the quarterly and annual Rental Income declarations? We charge 140,00 Euros + IVA (169,40 Euros) for each quarterly declaration if the property has two owners (two tax submissions) and 115,00 Euros + IVA (139,15) if there is just one property owner (one tax submission). We charge the same for quarterly declarations on rental incomes than for the annual declaration. For quarterly declarations with negative result (no need to submit declaration), if we need to make the calculations, we charge 85,00 Euros + IVA (102,85).
If you are a NON EU resident (UK included), and as you can’t deduct any expenses since 01/01/2021, and this simplifies our job, our fees are 100 Euros + IVA (121,00) for each quarterly declaration if the property has two owners (two tax submissions) and 80,00 Euros + IVA (96,80) if there is just one property owner (one tax submission).
2. How are the rental incomes rated? For Non Residents in Spain that reside in other EU countries (plus Norway and Iceland) this type of income is rated at 19%. Residents in Non EU countries, including the U.K. pay 24% (for incomes obtained after 01/01/2021)
3. What expenses can be deducted? Citizens of EU members, plus Norway and Iceland, can deduct the following expenses: Community Fees, Council Taxes, Insurance, water, electricity, mortgage interests, real estate agent fee, cleaning & laundry, maintenance and reparation costs. Please note that this is not a closed list, but these are the expenses that shouldn’t be questioned by the tax Office. You can only deduct the proportional part of the expenses corresponding to the number of days the apartment is rented or available for rent. And obviously you can only deduct the expenses that you are paying, not the ones that are responsibility of the tenant.
The purchase of furniture and appliances can be deducted as well, but is not dealt with in the same way as the maintenance expenses, it is considered as a fixed asset (“inmovilizado”). This means that the full amount paid for the item cannot be deducted immediately, but only a portion is deductible per year (for a period of several years depending on the item purchased). Therefore, if you have paid for a new Television, sofa or fridge freezer, etc. you will need to provide us with these details and we will apply the correct amounts in accordance with the requirements of the local Tax Authority.
Please note that you can NOT deduct expenses if you are not in possession of a proper INVOICE (quotations or “albaran” are not valid”)
Please note that you can NOT deduct travel expenses to/from Spain
Residents in Non EU countries (except Norway and Iceland) can NOT deduct any expense.
4. I am resident in another country. Do I still have to pay this tax in Spain? Even if the property in a company’s name? Yes. This is the Income Tax for Non Residents. According to the Spanish law, incomes obtained from the rent of a property situated in Spain, must be taxed in Spain. There are agreements in place to avoid double taxation between Spain and most of the European countries, so you will not have to pay twice (whatever you pay in Spain will be deductible off whatever you have to pay for the same income in your country).
5. How often do I have to declare and pay for these incomes? Unlike residents in Spain, who declare their rental income together with their other income in their annual tax return, Non Residents must submit a declaration every 3 months, according to the following calendar:
- Incomes obtained in January, February and March: declaration by the 20th of April
- Incomes obtained in April, May and June: declaration by the 20th of July
- Incomes obtained in July, August and September: declaration by the 20th of October
- Incomes Obtained in October, November and December: declaring by the 20th of January, and so on. This is also the moment to declare the negative outcome of any quarter corresponding to the previous year (i.e. a quarter where you have rented our the property, but with a negative outcome)
PLEASE NOTE THAT THE PRESENTATION OF THE DECLARATION INVOLVES THE PAYMENT OF THE TAX AT SAME TIME.
You also have to file an annual tax return by the end of each year, corresponding to the previous year (by the end of 2023 you have to declare for 2022), even if you obtain no actual income at all from the property. You can read more about this here
6. What happens if I pay late? The deadlines are very clear in the previous question. If you pay just one day late, the Tax Office will send you a “late fine” for up to 20% plus interests.
If you want us to pay this fine for you, we will charge 50,00 Euros + VAT, despite the amount of the fine. So, as you can see, it is very important that you pay on time.
7. I pay every year Income Tax for Non Residents (form 210). Does this cover the tax due for the rental incomes? No. If you have been filing an annual declaration with the form 210, always paying a similar amount, you have NOT been declaring the rental incomes, but paying a fixed amount on a “deemed” income, just for the fact of being Non Resident and owning a property in Spain. The rental incomes must be declared quarterly (if there have been incomes in that specific quarter) and obviously the amount will always be a percentage on the profit (19%). However, you will never pay tax twice for the same period, i.e. when you do your Annual Income Tax Declaration, you will pay only for the days that the apartment was not rented out, if any, because you have already paid for the rental incomes in the quarterly declarations.
8. I have not received the electricity and water bills yet. Can I deduct an approximate amount? No. According to the Tax authority you can only deduct the electricity and water bills once you have received them. And remember that Residents in Non EU countries (except Norway and Iceland) can NOT deduct any expense.
9. I have not received the Council Tax bills (Rates and Rubbish Collection fee) yet. Can I deduct them? Yes, you can deduct the proportional part, considering the same amount as last year if you don’t know the amount of the present one yet.
10. I have not rented out my property in the last quarter. Do I have to file any declaration now? Not for rental incomes, but remember that you have to file, and pay, every year the Income Tax for Non Residents (yearly, not quarterly). If you rent out the property but you have a negative outcome, i.e. you have more expenses than incomes, you don’t have to submit a quarterly declaration, but you will have to present a annual declaration declaring that loss. (between the 1st and the 20th of January each year)
11. What figure should I consider as the income: the amount paid by the tenant/guest or what I actually receive after the commission of the estate agent? You have to declare the amount paid for the rent by the tenant/guest, and you can deduct the commission or fees charged by the rental estate agent. But the income is the total amount paid by the tenant.
I am a retired London estate agent who specialised in lettings, I have been asked to look into the tax implications for two friends who each own three apartments on the Costa Blanca which have been rented out on a long term basis for the past 10 years and they have never submitted a single tax return. The properties have depreciated by about 40% at current valuation. I understand what they should have done and should be doing. My question relates to any penalties that may be imposed on them for not having declared their incomes over such a considerable length of time. Your thoughts on the matter would be appreciated.
I forgot to add that both owners live in the UK.
Thank you very much for your query.
There are two important points to keep in mind to begin with:
1) The fine or surcharge differs depending on whether your friends decide to pay the tax before the Tax Office ask them to pay, or whether it is the Tax Office who discover that your friends are not declaring their incomes. The latter will be much more expensive with fines up to 100% of the amounts that should have been paid.
2) The Tax Office can only impose fines on the taxes for the last 4 years, counting from the last day the tax should have been paid. The previous years have already expired. If your friends decides to pay, since the oldest tax period that has not yet expired, they will receive surcharge notices from the Tax Office for 20% plus interest with a discount of 5% if they pay these surcharges in time. Please note the difference between SURCHARGE (up to 20% + interests) and FINE (up to 100%).
So, if your friends have just realised that they should be declaring their rental incomes and paying the corresponding tax, my advice is that they start filing the tax declarations immediately before the Tax Office start any disciplinary procedures, which will be much more costly for them.