Guest blog from Peter Esders, solicitor at Judicare Legal Services
It is a typical scenario that we see over and over again. People buy property in Spain with a view to using it themselves for holidays, rent it out when they are not using it and then possibly aim to retire there in the future. There is no problem with this at all and all seems perfectly sensible. However, slowly over time the laws on rental in Spain have been changing. Because this has been a gradual introduction many people are not aware of the requirements.
Although Spanish Law is set at a National Level there are still laws that are introduced on a regional level by each Autonomous Region. I like to think of Spain as a mini version of the EU, with the National Government being the equivalent of the EU and the Autonomous Regions being the equivalent of each member country. You therefore get some laws that are rolled out over the whole area and others that are implemented on a regional level.
For many years there has been restrictions on the rental of properties on a “touristic” basis in Spain. This means that properties need to be registered with the Town Hall in order to be rented out to tourists. “Touristic” means renting out for holidays rather than renting out more long-term.
It was the islands (Mallorca, Tenerife etc.) that started to get strict on these laws along with Catalonia, encouraged by the hotel industry that was struggling against competition from private individuals renting their properties out (and often not paying any tax on that rental). Now a new law passed in Andalucia is bringing stricter legislation to the rental of properties in the area, which have an effect on thousands of people who currently rent out their properties. Owners have three months in which to apply for a license to rent their properties out.
The main points under this new change in the law in Andalucia are as follows:
- Reduce fraud. There is a huge number of people who rent out properties and never pay any tax on that rental income. Registering your property and having to have a license will cut down on this and bring better protection to consumers.
- Greater clarity as to what is defined as a touristic property. In the past, the lack of definition was what allowed many people to avoid having to comply with the law. The new law defines more clearly what a touristic property is – essentially it is now a property that offers touristic rental by way of a rental price and by marketing through channels such as travel agencies, estate agents and any other method by which the property can be reserved.
- The requirement to register property at the Registry of Tourism in Andalucia. If a property is not registered and rented out on a touristic basis then they will be considered illegal.
- The requirement for the owners to keep a registry of visitors.
- The property must now have some minimum requirements in order to be rented out:
- Some minimum requirements for ventilation (probably the requirement to have air conditioning in the main rooms between May and September).
- Minimum furniture requirements.
- Management of bed linen and cleaning upon arrival and departure of the people staying at the property.
- First Aid notice.
- Complaints notice.
- Tourist information.
- A telephone number to call for emergencies during a stay at the property.
- A maximum of four people staying in each bedroom. A maximum of 15 people per property.
- A period of three months within which to register the property according to the law. That three months will start to run from the time of official publication of the law which is any day now. If the registration is dependent on work being carried out to the structure of the property then there is a period of one year to do this.
- Fines of up to €18,000 in serious cases of breaches and up to €150,000 in what is considered very serious cases.
- If the property is rented to the same person for more than two months consecutively the law does not apply.
This is a significant change for those people who rent out property in Andalucia and is a general indication as to what is likely to roll out to other tourist areas of Spain. The requirements are, as you can see, not onerous and should reduce instances of property not being suitable for rental and also reduce instances of properties being rented out and no tax being paid on that rental.
It is worth remembering that if you are tax resident in the UK but rent a property out in Spain, you have the obligation to pay tax on rental income in Spain and also the obligation to declare that income on your tax return in the UK. However, because Spain and the UK have a double taxation treaty you can offset the tax paid in Spain against the tax you have to pay in the UK, meaning that you don’t end up paying tax twice.
Peter Esders can be contacted on:
Tel: 01438 840258
Email: peteresders@judicaregroup.com
Website: www.judicaregroup.com
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