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How will the Spanish Rentals Law affect owners of holiday rentals?
Despite the fact most of us are aware that changes have been announced, the specifics have been vague and inconsistent.
Q.Is there a new licence, how much will it cost, will it affect me and when?
A.The truth is, right now, nobody has conclusive answers and that includes the 17 regional governments who have been tasked to enforce the new legislation.
Private owners of holiday lets want to know if they too will be affected by the new regulations introduced. The answer is, some will, some won’t.
So what’s it all about…?
Some people will tell you that changes to the current regulations were passed in response to growing pressure from the hotel industry, who object to losing a significant percentage of their business to the holiday rentals market.
Take Andalucía for example; in 2019 alone, three times more revenue was generated through holiday rental stays, than through hotel stays.
And it’s important to make a point here: revenue generated from holiday rentals also extends to the local economy. It’s a fact that renters spend more money on local purchases, such as food and drink – both in restaurants and supermarkets, car hire, spontaneous trips and entertainment if they have rented privately. This all helps improve the local economy and boost revenue for smaller local businesses.
Another suggestion is that the Spanish government are clamping down on owners who are not declaring their income from their holiday rental home and evading their tax commitments. This is a fair point, if you are making money out of your home, you do need to declare it.
Figures published by Spain’s Finance Ministry estimate that there are still some 2.9 billion euros in undeclared revenue from the rental of private homes and a significant proportion of this comes from short-term holiday rentals.
However Spain’s tourism industry needs to be properly and efficiently regulated, it stands to reason that all accommodation is registered and achieves a minimum quality level.
The introduction of the Energy Performance Certificate (mandatory in most EU countries) comes into force on June 1st. Designed to set an energy efficiency standard in all properties for rent and for sale, this is an initiative first laid out in the Kyoto Protocol from 2007 which is standard practise now in many European countries.
What do these changes mean to me?
Well, firstly it’s important to recognise the benefits, both to you as a holiday homeowner and to the Spanish tourism market in general.
Regulating holiday rentals will bring Spain in to line with the rest of Europe. If you market your holiday rental, highlighting the fact that you follow the correct guidelines, you are sure to attract more renters who want to know that their holiday let is legitimate.
When and how should I apply for a licence?
At the moment the law is hazy and we advise that you seek clarification from your local town hall (ayuntamiento) and don’t be surprised if they don’t have the answer, or what they tell you today, changes tomorrow, the passage of information has always been slow in Spain.
Two types of holiday rentals:
Alojamiento Turistico (Tourist accommodation)
these are homes or units functioning as a tourist business, serving food and offering other services to tourists. If you fall into this category and you don’t currently have a tourist accommodation licence, then you should start looking into this straight away; as all regional governments will be enforcing licensing rules within this category.
You should register your property with your local town hall and they will explain what procedures will follow.
Casas Vacaciones (holiday homes)
Most of you will fall into this category if you rent your holiday home out for short-term holiday rentals, but you DON’T offer tourist services such as breakfast, entertainment, or other services to tourists. In this case, at the moment, you will need to be paying your taxes, have insurance in place and possibly need an Energy Performance Certificate. Then depending on your geographical position in Spain you may or may not need to apply for a licence.
Some Spanish regions have been cracking down on holiday rentals for a while, Catalonia, the Canary Islands, Mallorca and Asturias are four such locations. However, the new law has been implemented so inconsistently, that many owners are not even aware that they need to apply for a licence. An example of the current confusion is Mallorca, which stopped issuing licences a while back, so even owners, who want to do the right thing, are unable to do so.
We understand Vicente Granados, secretary-general of Tourism at the Junta de Andalucía, commented recently that the Junta will be studying a similar model to that of Catalonia for holiday rentals in Andalucía; where every rental home needs a licence. However, it will be towards the end of this year before they have an approved plan of action
So, to recap:
If you just rent out your home to holidaymakers, without services, then in most regions, at least until the end of this year, you will not have to apply for a licence, and in some cases, you will not be able to apply for a licence! As much as I would like to be able to give a clearer answer on this one, it’s too early to be able to do so.
Our advice is patient, keep asking the question at the town hall, ensure you have everything else in place and wait for further information on the subject.
What else do I need to do?
- Declare your earnings and pay the due taxes, the fines for non-payment of taxes can be very heavy.
- Consider putting your property into Trust which will reduce your Tax obligations significantly.
- Make sure you and your guests are covered with the right insurance.
- If necessary, apply for your energy efficiency certificate.
It does not matter whether you are resident in Spain or the UK; rent your whole property out, or just a part of it, you must declare your income and pay the taxes due. In some cases, you will also have to declare the earnings which you make in Spain to the UK taxman. Do not panic, the tax you pay in the UK, can be deducted from what you owe in Spain, you won’t be paying twice.
Energy Performance Certificate – what is it, do I need one?
The Energy Performance Certificate (EPC) or Certificado de Eficiencia Energética (CEE) was launched by Royal Decree on June 1st 2013.
An assessor will grade your home for its energy efficiency and you will be given a certificate based on the results. Now anyone selling or renting a property – short or long term – will need one, but of course, there are exceptions. Click here to read our article on the new Energy Performance Certificate.
Make sure you, your holiday rental property and your guests are properly covered with the appropriate insurance.
Accidents can happen and you don’t want to be legally or financially held responsible for any incidents that happen to your guests during their stay.
Good luck with your Spanish Property Investments. Better than having your money in the Bank any day!
Contact me if you would like to chat.