# Tax allowance on rental property



## chris&vicky (Feb 6, 2013)

I was putting in my tax return and my tax advisor tells me I can claim 600€ allowance because I rent a property in Spain. 

This puts me in a difficult position with my landlord as I am sure he thinks he is renting to me as holiday let. He has given me two 11 month contacts now. I did point out to the real estate agent when I got the first one that 11 month contracts are a complete nonsense as the law was changed making all rentals over 6 months long term (previously 12). She said she didn't know anything about that and asked her cologue who said it had not. 

Today my tax advisor said although the contract says is a holiday rental because I have two continuous claiming the allowance is not a problem. I said surely the fact that it is over 6 months makes it a long term rental anyway, she said she thought it had to be 12.

Have I dreamt this change or does nobody in Spain actually know about it? Surely these people should know? I am beginning to doubt myself.

I have now told my landlord that I intend to claim because I don't want to drop him in the **** but if he don't discount the rent by it then the claim goes in.

I don't mind paying my tax but object to paying more so somebody else can avoid it.

OK he may put my rent up at the end of the contract or ask me to move but I will deal with that then. He could end up with a lot worse than me and a load more fees to pay if I move.

What do you think guys?


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## snikpoh (Nov 19, 2007)

The actual situation now is that ALL long-term rental contracts must state whether they are for 6 or 12 months extendible to 3 years.

I'm really surprised that your agent new nothing about this or indeed said that this was not true - it is!

Rent increases MUST be in line with inflation and no more.


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## chris&vicky (Feb 6, 2013)

She claimed not to know. She was really only interested in one thing, in cash!


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## chris&vicky (Feb 6, 2013)

snikpoh said:


> The actual situation now is that ALL long-term rental contracts must state whether they are for 6 or 12 months extendible to 3 years.
> 
> I'm really surprised that your agent new nothing about this or indeed said that this was not true - it is!
> 
> Rent increases MUST be in line with inflation and no more.


As for rent increases, yes the law says, but the law is ignored. And if you fall out with your landlord things can become difficult.


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## CapnBilly (Jun 7, 2011)

snikpoh said:


> Rent increases MUST be in line with inflation and no more.


There must be a specific clause in the contract that agrees there will be a rent increase, otherwise it can't be increased.


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## larryzx (Jul 2, 2014)

Chris and Vicky. 

Most private rentals (and even agency rentals) are often not 100% legal, no matter what many say or even truly believe. Whilst that is contrary to the law the problem is that the law can be very complicated and gets interpreted differently by different experts, albeit that they may be qualified.

If the rentals are 100% legal, the chances are that the rents would need to be higher in order to pay all the taxes and to comply with all the regulations. That could mean the price of the rental is then more than many people who rent can, or maybe want, to pay.

One example: I believe if one employs an agent, or private person, to collect the rental, then IVA is chargeable. For a non IVA registered owner that can result in an IVA return every time rent is collected. That might mean a gestor’s fee each time.
That one can extend the period of a rental, against the wishes of an owner, just means there may well be less rentals available, thus less completion and higher rents. 

My son has a property which we have allowed a friend to stay in rent free (waiting for the property market to improve) because to make it a legal let would not produce any income after costs, unless we made it more than our friend can pay , and impose on us too many complications.

About 40 years ago in UK the labour government introduced tenants’ rights which were so draconian as far as property owners were concerned, many just stopped letting. The result: a serious shortage. 

Tenants rights are great but what about owners rights too ? If the owner is tied down too much why would they bother to let ? If you want to claim on your income tax for the rent you pay, maybe you will also need to the pay a lot more rent to make it viable for the owner.


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## chris&vicky (Feb 6, 2013)

larryzx said:


> Chris and Vicky.
> 
> Most private rentals (and even agency rentals) are often not 100% legal, no matter what many say or even truly believe. Whilst that is contrary to the law the problem is that the law can be very complicated and gets interpreted differently by different experts, albeit that they may be qualified.
> 
> ...


So the law is so complicated nobody understands it? No that's just a cop out. My landlord does not want to pay any tax, period. I am expected to pay more tax than I have to so he can pay nothing. 

As for the real estate agency they told me that they were not even aware there had been any changes to the law. Well actually they said to me no there had been no change. That is the business they are in, they should know and understand. 

Too many people are just ignorant of the tax laws in Spain and avoid tax because of the horror stories that people spread which are often total rubbish. The lady in the real estate agency when openly discussing with me how she refuses de declare income said, "if I paid the tax I was due to pay the tax would be more than my income". What total rubbish.


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## larryzx (Jul 2, 2014)

chris&vicky said:


> So the law is so complicated nobody understands it? No that's just a cop out. My landlord does not want to pay any tax, period. I am expected to pay more tax than I have to so he can pay nothing.
> 
> As for the real estate agency they told me that *they were not even aware there had been any changes to the law.* Well actually they said to me no* there had been no change.* That is the business they are in, they should know and understand.
> 
> *Too many people are just ignorant of the tax laws* in Spain and avoid tax because of the *horror stories that people spread which are often total rubbish*. The lady in the real estate agency when openly discussing with me how she refuses de declare income said, "if I paid the tax I was due to pay the tax would be more than my income". *What total rubbish.*


From that I assume you agree with me.

'I rest my case.'


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## chris&vicky (Feb 6, 2013)

larryzx said:


> From that I assume you agree with me.
> 
> 'I rest my case.'


You rest your case lol. No I don't agree with you. How you come to the conclusion that I agree with you by highlighting those few words is beyond me. I was really looking for sensible posts not getting into an argument. Bye. (Please don't bother to post in this thread again)


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## Overandout (Nov 10, 2012)

Personally I think that you should not be worried about creating a problem for your landlord who is at best trying to take advantage of a legal loop-hole, at worst, breaking the law.

I rent out my flat, am fully compliant with the law, and for that I pay a huge amount of tax on the income and can hardly rasie the rent despite the fact that I am making up a huge defficit every month between what the flat costs me and the few hundred €s that Hacienda leave me with after tax.

And you know what? It's my own fault. I chose to buy that flat and pay what I paid, I chose to leave Spain and be subject to higher non-resident's tax, I chose to rent it out instead of selling at a loss or leaving it empty. 

None of this gives me the right to evade tax, manipulate the system or impose econimoc restrictions on my tenant for my own benefit, and if I did any of those things I would deserve the consequences.

Spain's "black money" culture will never change if we, the victims allow the people who see this as normal acceptable practice to get away with it.

Rant over.

Carry on.


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## chris&vicky (Feb 6, 2013)

Overandout said:


> Personally I think that you should not be worried about creating a problem for your landlord who is at best trying to take advantage of a legal loop-hole, at worst, breaking the law.
> 
> I rent out my flat, am fully compliant with the law, and for that I pay a huge amount of tax on the income and can hardly rasie the rent despite the fact that I am making up a huge defficit every month between what the flat costs me and the few hundred €s that Hacienda leave me with after tax.
> 
> ...


I agree I choose to live in Spain and abide by their laws and pay my taxes. Although I find other peoples tax evasion rather annoying I have always treated it as none of my business. Now this has become my business because my tax is going to be more if I don't claim my allowance.

I rent out my home in England to fund paying for my house in Spain. I am taxed on my home in England by Spain. I didn't actually find the tax you pay in Spain on rental income much difference to what I pay on it in England. 

Yes Spain have higher tax rate and lower personal tax allowances but they also have a very generous allowance on rentals if you are renting to somebody as their main residence. In that case you only pay tax on 40% of the income and as this is exactly what my landlord is doing his tax burden is not unreasonable.

But whatever the taxes of the country are not liking them is no justification for not paying them.


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## mrypg9 (Apr 26, 2008)

chris&vicky said:


> I agree I choose to live in Spain and abide by their laws and pay my taxes. Although I find other peoples tax evasion rather annoying I have always treated it as none of my business. Now this has become my business because my tax is going to be more if I don't claim my allowance.
> 
> I rent out my home in England to fund paying for my house in Spain. I am taxed on my home in England by Spain. I didn't actually find the tax you pay in Spain on rental income much difference to what I pay on it in England.
> 
> ...


The situation for tenants isn't as dire as some like to make out. Neither is the law relating to rentals that complicated and any person dealing in renting as a business should be aware of the basics of that law. Yes, landlords can make life difficult for tenants but tenants can make life more difficult for landlords, if so minded.

We have been renting our house for over six years now. Initially we had a two eleven month contracts but after I pointed out that they weren't worth the paper they were written on the landlord and I wrote our own keeping within the law and with the parts of LAU that I didn't want omitted. The contract is for three years with a two-year extension if both parties agree. A rent increase in line with inflation may then be charged.
The fact is that possession really is nine or even ten points of the law. A landlord cannot harass you, evict you without a court order, cut off utilities....even in cases of non-payment of rent, due process has to be observed. This is costly and can take months. Even in the case of a successful eviction order, not something automatically granted, there is no guarantee that a landlord can recover unpaid rent or compensation for damages.
Of course no-one should wilfully embark on a confrontation but equally no-one should be walked over, intimidated or cheated of their rights, whether landlord or tenant.
If someone lives rent-free in your property and wishes to stay put when you want them out, again, absence of a contract won't help the property owner. The tenant, for that in law is what s/he is, can claim oral contract and mere fact of occupancy implies consent.
Several large properties in our area have been squatted and owners are obliged to undergo lengthy and expensive legal proceedings to get the occupants out. An acquaintance had horrendous problems with a non-paying tenant. He cut off utilities and was arrested. He went back to the UK before he was due to appear in court and the properties he rented out now stand empty.
The claim that if landlords paid tax due rents would rise sky-high is ludicrous. A fair rent takes all these things into account....overheads, market value, demand.
I was a UK landlord and must say that the claim about Labour's revised rent laws is unfounded. The Tory Government's rent acts were extremely biased against the tenant and Labour created a level playing field. In any case, supply of rental accommodation is affected by many other factors than rental laws.

Stand your ground. You have rights.


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## mrypg9 (Apr 26, 2008)

larryzx said:


> Chris and Vicky.
> 
> 
> 
> Tenants rights are great but what about owners rights too ? If the owner is tied down too much why would they bother to let ? If you want to claim on your income tax for the rent you pay, maybe you will also need to the pay a lot more rent to make it viable for the owner.



What you are saying, then, is that no landlord in Spain pays tax on their rental income as they would have to charge unaffordable rents.
If this is correct, the same must apply to the UK, France, Germany, anywhere where property is bought to rent.
So all across Europe rents are subsidised through non-payment of tax....

I know people who own property they rent, people who own rental agencies and people who rent and I believe that all of them pay tax and adjust their charges accordingly. 
Not declaring rental income is no different from working on the black . It is illegal, immoral and contributes to a third-world mentality that consolidates corruption and starves government at all levels of revenue needed for social projects.
I seem to remember we have discussed this, along the same lines, in a previous thread.


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## larryzx (Jul 2, 2014)

mrypg9 said:


> I seem to remember we have discussed this, along the same lines, in a previous thread.


Thus, no comment


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## chris&vicky (Feb 6, 2013)

...


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## chris&vicky (Feb 6, 2013)

I guess this solves the problem going forward. It looks like Spain has abolished the tax credit from 2015.

"Tenants 

The tax credit previously available for amounts paid to rent ones main residence has been abolished as of 1st January 2015."

A guide to Spanish income tax in 2015.


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## Overandout (Nov 10, 2012)

chris&vicky said:


> I guess this solves the problem going forward. It looks like Spain has abolished the tax credit from 2015.
> 
> "Tenants
> 
> ...


Thanks for that. Very useful.

Does anyone know if the costs of rental such as mortgage interest, repairs etc have always been tax deductible for non-residents from an EU state? Or is this new for 2015?

I have been paying the full 24.75% on my rental income since I left Spain as I was told that as a non-resident I could not deduct any costs, but according to this I can as I am British...

I have certainly overpaid in Q1 of 2015.


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## CapnBilly (Jun 7, 2011)

Overandout said:


> Thanks for that. Very useful.
> 
> Does anyone know if the costs of rental such as mortgage interest, repairs etc have always been tax deductible for non-residents from an EU state? Or is this new for 2015?
> 
> ...


The law changed in 2010 to allow the deduction of expenses that were incurred in the letting of the property. However, it only applies to non-residents of Spain who are resident in another EU state. Non residents who are resident in other countries are not allowed any deductions. This is because the change was required by the EU as countries are not allowed to discriminate against EU citizens, but they can do what they want to any other nationals.


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## Overandout (Nov 10, 2012)

CapnBilly said:


> The law changed in 2010 to allow the deduction of expenses that were incurred in the letting of the property. However, it only applies to non-residents of Spain who are resident in another EU state. Non residents who are resident in other countries are not allowed any deductions. This is because the change was required by the EU as countries are not allowed to discriminate against EU citizens, but they can do what they want to any other nationals.


Thanks Captain!

Interesting that there are two takes on the rules here:

You say that the non-resident has to be resident in another EU state.

But the blog that was linked to says that the relief is available to non-residents "from" another EU state.

I am British but living outside the EU, so by your interpretation I get no right to "desgravar", but according to Spainaccountants.com I would...

I guess I should look up the original tax laws to be sure.

But I am also wondering how Hacienda know where I am living? I'm sure that in my non-residents declaration I do not state where I live, only where i am "from"....


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