Wednesday, 27 July 2011

Holiday rental income – income tax payable in Spain

  • Don’t get caught tax evading

  • Tax authorities in Spain ARE tightening the noose

  • It suits the Spanish – aimed at non-residents

August Update
Most correspondence that I have received on this subject has questioned why people who rent out their houses/apartments 'didn't know before'. I've referred them back to their agents. Well I'm not sure why they didn't tell you, if they are professional letting agents they should be telling you. If they are not professional, why are you using them?

It seems to me that its a case of doing it on the cheap. Unprofessional agents, paying no tax, asking no questions - it will end in tears! One last thought, 'if they didn't tell you about tax, did they tell you about Landlord Insurance?' A drunk falls down the stairs, a child falls in a pool or your property gets trashed.  Think about it!

I have written much about the difference between Tax Avoidance and Tax Evasion and explained the difference. My most recent post was;

I’d like to draw your attention one item in that post. Under the heading of ‘Examples of tax evasion’

Not declaring income from property letting

There is very clear evidence that the Spanish Tax Authorities (La Hacienda) are now taking the subject very seriously. Given the Spanish Government’s massive budget deficit and the need for more revenue, I contend that holiday rental income is a ‘soft’ option. Everyone knows it happens, the houses / apartments don’t move and the Town Hall know who the owner is!

If you are a property agent you really should be telling your owners.

Not surprisingly, the Spanish public would support such a move as the vast majority of non-payers are Non-residents. Most taxpayers in Spain would love to see British and Irish citizens fined heavily for not paying their due taxes.

Ok, so you think I’m alarmist, it won’t come to that, I reckon I’ll get away with it. Even though I knew that this was a tax evasion issue, I never brought it to my readers’ attentions until now. In the last few days I have seen evidence that it is starting to happen. La Hacienda is cracking down.

My Telegraph
This is the blog of the ‘Daily Telegraph’. A post by Anna Nicholas indicates that the authorities ARE beginning a crackdown on non-payment of tax on holiday rental income.

Anna’s thoughtful contribution is good evidence…. But what follows is better
These people know what it’s all about. They advertise the properties which produce the income that should be taxed in Spain. They have copied Anna Nicholas’ blog on their website!

If you want the link, email me and I’ll send it.

What do I think?
As the economic crisis deepens in Spain, there will be a more proactive and ruthless approach to tax evasion of this kind. So for those coasting along the coast evading tax, perhaps now is the time for a little honesty, pay the 25% tax, before the Spanish taxman comes knocking at the door and looking to claim for previous years. Alternatively, pack up your illegal letting and stop worrying.

If you have any issues, any comments or just additional information please email me