Spain is going through a bit of a quiet revolution and there are changes that are happening to try and kick-start certain parts of the economy and to try and clamp down on illegal activities. Over the last couple of years one such area that has seen changes is in the property rental sector. There are huge numbers of people who buy property in Spain to rent it out to tourists and therefore there is a huge amount of money that flows into the hands of private property owners.
The fact that there is a huge number of private individuals renting out properties in Spain to tourists brings with it a series of issues that the authorities are trying to resolve (under pressure from the hotel industry who is losing out income to private rentals). As a consequence we are seeing a gradual change in the laws in the more touristy areas of Spain. Andalucia is the latest area to introduce a new law regarding the rental of properties to tourists and this comes on the back of similar laws being introduced in the Balearics and Catalonia.
The new law in Andalucia brings with it some significant changes which people who own property and rent it out should be aware of;
1. A reduction in fraud by introducing a requirement to have a licence to rent out property to tourists. Many people rent out properties in Spain and do not pay the correct tax, or even any tax at all. They receive the rental in cash and don’t declare it. They take the view that they are British and rent to British people and therefore no tax is due in Spain. Then on their tax returns in the UK they take the view that the property is in Spain and therefore no tax is due in the UK. The reality is that regardless of who you rent out to if the property is based in Spain you should pay tax on that rental income in Spain. If you are tax resident in the UK you should also pay tax in the UK but can offset the tax paid in Spain against the tax that should be paid in the UK, meaning that you don’t pay tax twice. The requirement to register and get a license will make it more difficult to rent out the property and not pay tax on the rental income.
2. Better protection to consumers. At the moment most people can rent out their property and all they need to do is to start advertising it and find clients. The new law brings with it certain requirements which will increase the protection to those people who rent private properties. The owners of the property now have to have some minimum requirements including;
a. Minimum ventilation requirements including the installation of air conditioning in certain rooms
b. Minimum furniture requirements
c. The management of cleaning and bed linen management upon arrival and departure of guests
d. First aid notice
e. Complaints notice
f. Tourist information
g. A telephone number for emergency calls during the stay at the visit
h. A maximum of 4 people staying in each bedroom and a maximum of 15 people staying at a property
i. To keep a registry of visitors
3. Greater clarity as to what is a “touristic property”. In the past there was some ambiguity as to what this meant and the new law clarifies this by stating that a touristic property is one which 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. If a property is rented out to the same person for more than 2 consecutive months then the law does not apply.
Owners of touristic properties now have to register the property with the Registry of Tourism in Andalucia and it will be illegal to rent out such a property if it is not duly registered. Current owners have a period of three months in which to register and that three months starts from the date of official publication of the Law. If the property requires work to bring it up to the regulations then the period for registration will be one year. If you don’t comply with the law then fines can be up to €18,000 in the case of serious breaches and up to €150,000 in those cases which are considered to be very serious.
So if you own a property in Andalucia and rent it out to tourists the clock is ticking and you have to make sure that you get the property registered on time. If you own a property in the Balearics or Catalonia then it is worth remembering that they have similar laws that have been in place for some time and if you have a property in an areas that doesn’t yet have such laws then prepare yourself as they are likely to be introduced at some point in the future.
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