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The Civil Chamber of the Spanish Supreme Court (Tribunal Supremo) has issued in December 2023 two rulings in which it considers that the rental of dwellings for tourist use is an economic activity.
The Tribunal Supremo (TS) has issued two rulings in which it upholds the veto of 'tourist flats' in the communities of owners that expressly prohibit in their statutes the use of the dwellings to carry out an economic activity. The court considers in this respect that the rental of dwellings for tourist use is an economic activity.
In light of the above precedents, those buying Spanish properties with a tourist license so that can be rented out outside the protection of the Spanish tenant’s act (Ley de Arrendamientos Urbanos 29/1994 of 24th of November) on a short term basis using platforms such as AirBnb, Booking, HomeAway, Wimdu, etc), should review the building’s community of owners’ statutes and find out whether economic activities are prohibited as otherwise may find their investment frustrated.
At Scornik Gerstein LLP we regularly advise individuals and entities purchasing properties in Spain, including incorporating tax efficient structures to maximise their investments’ returns with the reassurance of a Spanish law specialist firm with almost 40 years of experience and a minimum professional cover of £3 Million.
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Spain´s cabinet has announced a new draft housing bill whose main points are the following:
- Caps on rent for landlords who own 10 or more properties. This measure will affect in particular real estate companies and investment funds. The Spanish government has not yet published the draft so details about the cap are not available at the moment.
- Increase up to 150% on a local property tax known as Impuesto sobre Bienes Inmuebles (IBI) for empty properties whose landlord own four or more residential properties.
This measure does not apply to:
- Second homes
- Residential properties which are caught up in Court proceedings
It is important to bear in mind that, the enforcement of these measures depends on the Spanish municipal authorities and rules, as they cannot be directly enforced by the national legislation.
In consequence, some regions governed by the political party called Partido Popular(PP) such as: Madrid, Andalucia or Murcia, have announced that they will not apply the said new rules over those regions.
The Spanish cabinet has estimated that its draft housing bill will be approved by the second half of 2022. If you want to be updated about this topic, send an email to london@scornik.com and you will receive the latest news.
Written by Laura Gallego.
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Has the conveyancing process changed for UK nationals?
No, the property purchase process has no changed as a result of Brexit.
However, as an exception to that rule, as from 1 January 2021, UK nationals who wish to buy a property or land surrounding a military base in Spain, will need a military permit from the Spanish Ministry of Defence, as per Law 8/19751.
I own a property in Spain: Has Brexit affected my ownership rights?
Property rights are not linked to residency status and accordingly, all owners of property in Spain have the same rights.
Will my Foreigners' Identity Number (NIE) change as a result of Brexit?
In accordance with the Real Decreto 338/1990, the obtaining of a Fiscal Identification Number for all non-residents (NIE), Companies or Individuals is necessary when dealing with bank accounts, effecting monetary transactions and forwarding declarations for Wealth Tax and Income Tax.
If you had a NIE before Brexit, it is still valid after 1st of January 2021.
Will I pay more tax when selling or buying my property in Spain after Brexit?
No, the same taxes involved in a transfer of property at the same ratios operate after Brexit.
How about renting out my Spanish property?
As from 1 January 2021 (Brexit), British tax residents have become liable for higher rate of non-resident income tax of 24% as opposed to the previous lower rate of 19% which applies to European tax residents.
In addition, Britons owning property in Spain can no longer offset expenses incurred in the management of the property rented out such as community fees, repairs or IBI tax (Impuesto sobre Bienes Inmuebles) tax, which is the equivalent to the UK council tax.
Example
Samantha has rented out her property during 6 months, receiving a monthly. 1.600 x 6 = 9.600 Euros as a rental income.
During these 6 months of rental period, Samantha incurred in expenses (repairs, IBI and community fees) which reached the total amount of: 1.400 Euros.
1.400 Euros as expenses.
How much tax will Samantha pay?
| PRIOR BREXIT Until 30/12/2020 | AFTER BREXIT From 01/01/2021 | |
| Gross income | 9.600 € | 9.600€ |
| Deductible expenses | 1.400€ | not entitled |
| Net income | 9.600 - 1.400= 8.200€ | 9.600€ |
| Non resident tax to be paid by Samantha | 8.200%19 = 1.558€ | 9.600%24= 2.304€ |
It is important to note that United Kingdom and Spain has a double tax treaty in place, which prevents paying twice for the same income in both countries.
What is required to purchase a property in Spain?
You can find the information in the following link: Conveyancing.
Escrito por Laura Gallego Herráez.
1BOE.es - BOE-A-1975-5292 Ley 8/1975, de 12 de marzo, de zonas e instalaciones de interés para la Defensa Nacional.
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