A guide to renting out your holiday home in Spain
As the second most popular tourist destination in the world, attracting 82 million visitors a year (according to the UN World Tourism Organisation) Spain is a relatively safe bet when choosing a location to buy a holiday home to rent out. Catalonia (home to Barcelona), Andalusia and the country’s capital, Madrid, have all proven to be particularly desirable tourist destinations in mainland Spain. While the Balearic Islands and Canary Islands are also very popular amongst tourists.
Renting out your Spanish holiday home can be a great way to help fund the cost and upkeep of the property. However, it’s not always without it’s complications. With mass tourism coming under fire in already overcrowded areas there has been a crackdown on holiday rentals in some regions in Spain, so if you intend to rent your holiday home out it’s important to ensure you know and follow the laws of the land. There’s also the question of how to let the property and who will manage the bookings. What do you do if things don’t go to plan?
Here are our top tips for ensuring that your investment in your dream holiday home in Spain doesn’t become a nightmare!
Do your sums
Before you decide on a property to buy in Spain make sure you work out whether the finances add up.
If you need a certain amount of rental income to fund the purchase and/or the upkeep of the property you need to factor in expenses, such as management fees, cleaning and maintenance charges.
Don’t forget that not all regions in Spain will attract year-round visitors. The Costa Blanca, Costa del Sol and Canary Islands enjoy sunshine all year round and people visit places like Barcelona and Madrid for city breaks throughout the year. However, some tourist destinations in Spain, like the Costa Brava, are seasonal and therefore you will need to consider how much annual profit can be made. Don’t assume that your holiday rental will be booked out 24/7 – you should account for any periods when the property may be vacant.
Make sure you are legally allowed to rent the property in Spain as a holiday let
In recent years many regions in Spain have clamped down on holiday rentals in a bid to keep property prices affordable for locals, so you will need a licence to rent out a holiday home in most regions. Without a valid holiday rental licence, you may be subject to hefty fines!
Palma in Mallorca, for instance, is set to become the first Spanish city to ban Airbnb-style holiday apartment rentals to tourists from July 2018. While Andalusia has had a strict holiday rentals policy for the last two years. However, in that time the local authority in Andalusia has issued more than 26,000 holiday rental licences and as of February 2018 amended the law to allow the rental of rural properties in Andalusia more easily.
If you intend to rent out your property as a holiday let in Spain it’s crucial that you do your research and ensure that the property meets the criteria (such as having central heating and air-conditioning, for example) for holiday rentals according to the local law. Some older properties may not meet the basic standards required, and it can be expensive to make the necessary update. So, keep this in mind when viewing properties and make sure you let your estate agent and lawyer know that you intend to rent the property as a holiday home.
Top tip: Remember that Spain has 17 autonomous regions, each with their own legal nuances, so we strongly recommend seeking the advice of a Spanish lawyer before committing to a buying a holiday home in Spain.
For a recommended independent English-speaking Spanish lawyer contact our team on 01244 478911 or email email@example.com.
Choose who will manage your holiday in Spain let carefully
Unless you’re living in Spain or have friends or family who can help, you will probably need to use an agent to manage the rental of your property – from handling bookings and receiving payments to cleaning, laundry and greeting guests.
From ‘one-man-band’ outfits to large-scale professional companies there are plenty of people willing to offer holiday rental management services in Spain. You may prefer to hire a local individual to offer a personal touch or it might be more convenient to delegate your holiday let management to a larger organisation. However, you do need to make sure that their service complies with the local Spanish law. For instance, in many regions you’re required to register your guests with the local police station within 12 hours of their check-in. This is a relatively simple process, but if you’re entrusting the management of your holiday let in Spain to someone else or an organisation on your behalf you’ll need to make sure they comply with such rules.
Top tip: While you’re viewing properties in Spain, ask around in the local area for first-hand review and recommendations of holiday letting management firms in the region.
Pay your taxes
Like many countries, the tax system in Spain can be quite complicated, especially if you are not habitually resident in Spain. As a homeowner in Spain, you are required to pay IBI Tax (Impuesto sobre Bienes Inmuebles) – the equivalent of council tax in the UK – regardless of whether you live in the property permanently or not.
In addition, if you rent your holiday home out you must also declare your holiday rental income in Spain with the Spanish tax authorities. Non-residents, who own property in Spain are required to pay two taxes:
- Non-Resident Imputed Income Tax – an annual tax which must be filed before the 31stof December each year.
- A quarterly tax on your rental income in Spain
As an EU or EEA citizen you can offset expenses such as mortgage charges, cleaning fees, management fees etc. against these taxes in Spain, providing you can prove income and expenditure with the necessary documentation.
You should also consider factoring in the tourist tax (tasa turistica) which applies to all tourists over the age of 16 in Spain and its Islands, to your pricing. Depending on the type of accommodation (i.e. camping, apartment, luxury hotel etc.) the tax can cost up to €4 euro per person, per day in the most expensive regions including the Balearics, which has recently doubled its tourist tax to help protect the Islands’ resources.
As long as you’re not providing any services, such as daily cleaning, catering or transportation services, you will not need to charge IVA (Spain’s version of VAT). However, if you do provide such services you will need to charge 24.5% IVA, register with the tax office as charging IVA and ensure that you retain 24.75% of your earnings, which should be paid at the end of the year. If you use a management company to handle your bookings for your holiday home in Spain, they should handle this for you.
Top tip: Appointing a fiscal representative in Spain can help you navigate the complexities of the tax system in Spain. Contact the team at Total Buying Abroad for more information about appointing a fiscal representative on 01244 478911 or email firstname.lastname@example.org.
Ensure your property in Spain is correctly insured
You will need to ensure that your property in Spain is sufficiently insured as a holiday home. Make sure that your policy covers you for renting out the property as a holiday let (not just a standard rental property) and is not merely a building and contents insurance policy. Check whether the policy cover public liability insurance? Are you covered for when your property when is not occupied? Does it cover you for loss of rent or income?
Top tip: Consider using a trusted broker or compare a number of quotes, as prices can vary.
Article published: May 31, 2018