EDITOR'S NOTE: Marbella-based solicitor Raymond Nesbitt explains the rental reliefs non-resident landlords may now benefit from, following a recent European Court of Justice ruling.

By Raymundo Larraín Nesbitt
Lawyer – Abogado
13^th of January 2017

Following a recent European Court of Justice ruling, non-resident landlords may now benefit from the same tax allowances that were previously earmarked for Spanish residents. This will greatly mitigate your tax bill on renting out your Spanish property.

You can read a long unabridged article on the matter here which explains the changes in more detail, or else continue reading for the short version.

What is required by a non-resident landlord to deduct Spanish rental expenses?

• Currently only residents in the EU or EEA qualify to benefit from rental allowances.
• You will need to produce a certificate of tax residency in the corresponding State issued by the tax authorities of that State which will be required on filing the tax return.
• Proof must be supplied that the following (deductible) expenses are directly related to rental income earned in Spain and have a direct economic connection that is inseparable from the activity carried out in Spain.

 List of expenses that can be deducted from your rental income

This is a closed list. In addition to the letting reliefs listed below some regions in Spain may offer additional rental deductions.

• Interests arising from a loan to buy the property (i.e. mortgage loan).
• Local taxes and administrative charges and surcharges that impact on the rental income or else on the property itself (i.e. IBI tax, SUMA tax, rubbish collection tax).
• Expenses arising from formalising rental contracts such as lets or sublets (i.e. Notary and/or Land Registry fees); legal defence (i.e. hiring a lawyer for tenant eviction purposes).
• Maintenance costs may be offset; refurbishment expenses (improvements) are excluded.

Examples of maintenance costs (deductible): repainting over flaky paint, plumbing, debugging, tennis court green mold cleaning, swimming pool pump replacement, annual lift maintenance, leaking faucet.

Examples of refurbishment expenses (non-deductible): glass curtains, double-glazed windows, parquet, marble floor, extension to property (outbuilding), tennis court, swimming pool, private lift.

Notwithstanding the above, refurbishment expenses (improvements) may be claimed on selling the property by offsetting them against your Capital Gains Tax liability. Please read my article: Taxes on Selling Spanish Property.

• Home insurance premiums (theft, fire, civil liability etc.). Please read my articles Home Insurance in Spain, Community of Owners’ Insurance Policies and How to Cancel your Home Insurance Policy in Spain. However claims arising from events that diminish the value of a dwelling are non-deductible i.e. fire.
• Utility invoices (electricity, water, gas and landline).
• Concierge, gardening & security services (i.e. gated communities).
• Rental publicity expenses.
• Home depreciation and amortization. The calculation is 3% on the highest value of the following two: home buying costs or cadastral value; the value of the land is excluded.

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyancing, inheritance and litigation. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.

Legal services Larraín Nesbitt Lawyers can offer you

• Registration of Holiday Rental Homes
• Holiday Rental Accounting Service (HRAS)
• Rentals
• Fiscal Representation (Non-Resident Income Tax)

 Related articles

• Renting in Spain: Top Ten Mistakes – 8th of June 2011
• Let-to-Buy in Spain: The Smart Choice – 8th of April 2012
• Letting in Spain: The Safe Way – 10th of October 2012
• New Measures to Bolster Spain’s Ailing Rental Market – 8th of July 2013
• Tenant Eviction in Spain – 8th of June 2014
• Holiday Rental Laws in Spain – 8th of March 2015
• House Hunting in Spain – Interview with The New York Times. June 2015
• Resurgent Spain: Málaga Sees Strong Sales – Interview with Mansion Global (The Wall Street Journal). December 2015
• Non-Resident Taxes in Spain – 8th December 2015
• Holiday Rental Laws in Andalusia (Decree 28/2016) – 8th of February 2016
• Decree 20/2002: Andalusia’s Holiday Rural Rental Decree – 8th of April 2016
• Urban Rental Law in Spain – Spain's Tenancy Act – 8th May 2016
• Renting in Spain – Landlord’s Taxation – 8th of January 2017
• Holiday Rental Home Taxation in Spain – 8th of July 2017
• Holiday Rentals in Andalusia Made Easy – 3^rd July 2017
• How to inspect an off-plan property overseas – Q&A with The Sunday Times. July 2017
• New Balearics holiday rental law – 8^th September 2017
• Seasonal lets: an alternative to holiday rentals – 8^th October 2017
• Let-to-buy contracts: do not forget to add a clause forbidding sublets! – 20^th October 2017
• Andalusia starts fining holiday home landlords – 31^st October 2017

Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.

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