Welex, your law firm and economists in Marbella, capital of the Costa del Sol, has the pleasure of writing a few lines about the application of the Value Added Tax, VAT, on tourist accommodation in Spain.
The rental of a property in Spain can be exempt from VAT but also subject to different rates of VAT in Spain, specifically 10% or 21% depending on the type of property and the type of services provided to clients.
Tourist Accommodation in Spain
The VAT Law (LIVA) indicates that entities or persons engaged in the rental of tourist accommodation are considered, for the purposes of this tax, as entrepreneurs (art 5. Paragraph 1-C LIVA). When the activity is carried out by entrepreneurs «the rental of tourist accommodation shall be subject to VAT» (art 4. Paragraph 1 LIVA).
The activity of accommodation is different from the activity of renting accommodation, as the activity of accommodation normally includes other services that complement the letting of the property.
These services, as defined in the law, are, among others, the following:
– Laundry service
– Cleaning services
And other services outlined by the Directorate General of Taxes, such as, for example:
- Reception and/or permanent and continuous customer service in a space set aside for this purpose.
- Periodic cleaning of the property or accommodation.
- Periodic change of bed and bath linen.
- Laundry service.
- Custody of luggage.
- Food and catering services.
This type of services will be invoiced with 10% VAT, like a hotel establishment in Spain.
If the tourist accommodation in Spain offers any of the services that are subject to VAT, this point will be very important:
The activity of a tourist flat is included in group 685 of the Economic Activities Tax (IAE). It is an «extra-hotel tourist accommodation», itself included in «accommodation services». The economic activity of this group is included in group 685, section 1 of the Economic Activities Tax rate.
In this group are included most of the accommodation services different from those usually known, such as, for example, a hostel, pension, hotel, guest house, apart-hotels, campsites, camping, etc.
Services for which VAT is not declared to the Spanish Inland Revenue on the rental of property in Spain
If the services indicated above are not offered and, on the other hand, another series of services that we list below are carried out, which are not understood as a complement to the hotel activity, VAT should not be charged and will not have to be declared in the invoices for that holiday rental to the AEAT.
- Cleaning of the property before the stay and after the departure of each client.
- Change of textiles (towels, sheets, etc…) before the stay and after the departure of each client.
- Cleaning of the communal areas of the building and/or the urbanization where the property is located.
- Maintenance, repairs and assistance for occasional problems with electricity, plumbing, locks, electrical appliances, etc.
In the event that a legal entity that owns a property and that subjects it to the activity of «Extra-hotel tourist accommodation» will have to comply with the following points:
1) That the invoices issued by the company are subject to 10% VAT.
2) That your company has multiple clients/year. We were talking that the expectations are about 30 different clients a year
3) That the invoices clearly indicate the services provided so that it does not rise to potential discussion with Spanish Inland Revenue and that these services are actually provided.
4) As your company is not expected to have staff that provides the aforementioned services, you will have to obtain the corresponding invoices from the supplier that has provided these services that will be booked as an expense.
Economic Activities Tax of a holiday let in Spain assigned to a company that manages the holiday let
We will analyze the case of an owner of tourist accommodation in Spain, who transfer it to another entity or legal or natural person, and the latter is the one who exploits this accommodation, as an extra-hotel establishment, assuming the advantages, disadvantages and risks of this business exploitation.
The activity carried out by this owner, in this case, is the leasing of real estate. This activity is included in heading 861.2/1 of the Economic Activities Tax, and is called «Rental of industrial premises and other NCOP rentals». It is not an economic activity for Income Tax purposes, but the tenant will have to be invoiced for the rental of the property at 21% and withholdings will have to be included where necessary.
Personal income tax return for income from tourist rentals in Spain without accommodation services
If a tourist accommodation does not offer the accommodation services mentioned above, the profits from the rental of this property are considered as income from real estate capital. As we have already seen, the cleaning of the property before the stay and after the departure of each guest or the delivery and collection of keys upon arrival and departure of the guests, for example, are not considered as accommodation services. It is, as a general rule, the owner of the tourist accommodation, as the owner of the property, who must declare the differences between the full income received and the deductible expenses to the AEAT in the annual personal income tax return.
Finally, in the periods in which the tourist accommodation has not been rented, they generate the imputation of real estate income, just like any other dwelling. And in this case, the amount will be the result of applying the imputation percentage that corresponds to the cadastral value of the property. In addition, it must be weighted according to the number of days that it has not been rented for tourism purposes.
Please do not hesitate to contact one of the tax lawyers of Welex, lawyers and accountants in Marbella for any tax or legal query you may have.