Renting your Costa del Sol Property Mid or Long Term? Here’s What To Expect
Thousands of people have bought property on the Costa del Sol with the intention of renting it out either short, mid or long term to tourists or local residents and not just covering the running costs but making a healthy profit as they go.
Not a bad idea really. Imagine owning a two bedroom apartment or a luxury six bedroom villa, or anything in between, and being able to sit back and have the property pay for itself!
Sounds great…and if you can do it in compliance with Andalucian laws at the same time, even better.
Well for once, getting your property complaint with those annoying rules and regulations that are made by some ‘know it all do-gooder’ from behind their desk in some dingy dungeon somewhere are not too hard to do and the peace of mind you get that from getting that approved gold star is priceless.
There are two things that need to be in order.
Paperwork & Property
I usually get shivers running down my spine when someone mentions paperwork to me. That depressed sagging of the shoulders is bad enough when I have to plod through documents, risking paper cuts and confusion, when it’s in English…never mind Spanish. Well, the good news is that you are not alone.
If you intend to do all the work yourself or employ a property management company to do it all for you, either way, you will have to pay some of your hard earned gains to the tax man.
How much he takes depends on a few things (naturally), and so to keep it easy, here’s how it works.
Medium or Long Term Rental – Periods of 60 days or more for residential or business purposes
Like most things, there are a few different scenarios so we can settle for the most common.
- The tenant (the one paying the rent) is a just a regular guy who is using your property as somewhere to call home. Empty crisp packets and half eaten Pot Noodles everywhere, piles of laundry, a permanent imprint of their fat ass on the couch and dodgy pictures of a dog on the coffee table…you get the idea. In this instance, the rental income that you get is simply that, a rental income, and as such, the tax man does not ask for any VAT to be added to the rental amount.
- The tenant is a company, which will be using your property as a place of business. There may sometimes be a fine line between the two but for your own sanity, if you are not sure, get some legal advice. If the tenant is a company, then the owner of the property must add a 21% VAT charge onto the rental amount. This VAT must be paid to the tax office on a quarterly basis.
In any instance of medium or long term rentals, there are no hoops of fire required to be leaped through to get any specific registration. If you are renting short term, then there is, but in this case, there isn’t. Result!
Income tax to be paid
For Europeans, tax is part of our way of life. We pay it on everything, all the time. It’s like going for a walk and getting caught in the rain. It’s annoying but you get used to it. For our fellow mankind in the Middle East, for example, ‘tax’ is very nearly a four letter word. Either way and whoever you are, you will have to pay it.
So how much?
Yeah. I know. It sucks a bit but you can still make some decent income even after the vultures have been fed!
BORING IMPORTANT NOTE
Whatever your residence or tax status, subject to the International Double Taxation Agreement, the tax you pay in Spain on your rental income could be tax deductible in your country of origin. Your lawyer and accountant can provide you with a necessary certificate to present to your accountant in your country of residence.
If you are an EEC resident then you can deduct your running expenses from the income.
What are the expenses that can be deducted?
IBI and Basura – These are the two annual fees that everyone pays. IBI is an annual council tax, and the Basura is a contribution toward refuse collection.
Your monthly community charges
House and content insurances
Any fees paid to Estate Agents
Lawyers fees for rental agreement services
There are more too, which if your accountant is worth their salt, will be able to reduce the net yield down to the minimum allowed.
If you are looking for SHORT TERM RENTAL please go HERE
If you need any advice (it’s free, but we might try and convince you of something) then just hit the button below and we will call or email you at a time that suits you.