As we approach the deadline for filing the 2024 tax return, which runs until June 30, it's crucial to understand the tax details related to vacation rentals in Spain.

These rentals are distinguished by their limited-duration nature and the specific services they offer, which differentiates them from other types of leases regulated by the Urban Leasing Act.

Since these rents generate income, it is important to comply with the corresponding tax obligations. This is where deductible expenses come into play. In addition, it is important to know the type of each rental because depending on the return for which it is declared, different obligations and deductions will apply.

‍

Types of tourist rentals and applicable taxes

They exist two types of vacation rentals that must be declared to the Public Treasury. The correct classification is crucial, as it determines the corresponding tax obligations and deductions.

Tourist rentals with lodging or complementary services

These rentals offer additional services beyond simple accommodation, similar to those in the hotel industry. These services may include:

• Reception of guests.
• Periodic cleaning.
• Laundry.
• Suitcase custody.
• Provision of food and restaurant services.
• Recreational activities, among others.

In these cases, the revenue generated is classified as profits from economic activities and you will be subject to the following taxes:

• Economic Activities Tax: It will only be paid if your business income exceeds one million euros net. This direct tax applies to individuals and legal entities that carry out business, professional or artistic activities in Spain. It is important to be registered with the IAE under the code 685 in the name of Non-hotel tourist accommodation.

• Value Added Tax: According to law 37/1992, the rental of this type of tourist apartments will not be exempt from this tax and must be taxed at the reduced rate of 10% as a hotel establishment (art. 91.ono.2. 2nd VAT).

• Personal Income Tax: Residents in Spain must declare the benefits obtained, since rental income is considered income from economic activities because they are providing complementary services typical of the hotel industry.

Tourist rentals without lodging or complementary services

These rentals refer to accommodations that do not offer additional services beyond the basic ones, such as:

• Cleaning and change of bed linen upon arrival and departure of guests.
• Property maintenance or technical assistance for possible repairs.
• Maintenance and/or cleaning of the common areas of the building or development.

The income derived from this type of rental is considered profits from real estate capital. In this case, the tax obligations are:

• Economic Activities Tax: For this tax, you must register in the IAE heading 861.1, relating to the rental of housing. However, the law provides that those who make only leases of properties exempt from VAT that are not considered economic activity for the purposes of personal income tax do not need to register.

• Value Added Tax: since rental income of this type is from real estate capital, and not derived from an economic activity, you will be exempt from declaring VAT.

• Personal Income Tax: income derived from this type of rental is considered income from real estate capital for personal income tax purposes. It is taxed as an income tax for the time that the house has not been rented during the year. It is necessary to declare the time in which the property has not been rented, since the Tax Agency applies a tax on this period, which varies between 1% and 2.2% of the cadastral value. However, there is the exception that if the owner has a person hired full-time to manage the accommodation, then the income obtained is considered income from economic activities.

‍

Deductible expenses on vacation rentals

As in any economic activity, there are deductible expenses on the income tax return that are crucial to document. If you're an individual taxpayer and you earn rental income, it's important to know the various types of expenses you can deduct.

Whether or not the tourist rental includes complementary lodging services, you can deduct a variety of associated expenses with the management and maintenance of buildings, such as:

• Maintenance and repair costs
• Insurance premium expenses
• Tax and fee expenses
• Financial and amortization expenses of the property or its assets
• Advertising and promotion expenses
• Rental management and administration expenses
• Expenses for services and supplies of the property.

Supplies such as electricity, internet, water and gas are services that have to be offered in order to rent it on a tourist basis and their expenses can be deducted as follows:

• If you are a natural person and since the Payment for supplies is borne by the owner, yes they could be deducted, but always in relation to the days of occupancy. In other words, the expense must be apportioned prior to its deduction. Only if the property has had 100% occupancy during the year, then you can deduct all of these expenses.

• On the other hand, if you are a legal entity and the properties in question are in the name of the company, so can be deducted at 100% regardless of the level of occupancy.

As an owner or manager of tourist rentals, it is important that keep a detailed record of all your documents and bills to support your expenses and deductions. You should keep in mind that deductible expenses must not exceed the gross income earned. If this happens, you can spread those expenses over a maximum period of four years.

It's important to keep in mind that tax regulations may change and that specific deductions may be subject to certain limits or restrictions. Therefore, it is advisable to consult with a tax advisor or accounting professional for specific guidance on deductible vacation rental costs.

‍

How can I calculate the total expense I can deduct?

To calculate the exact expense that you can deduct, you would have to divide each exact expense of supplies by 365 days (full year) and multiply it by the days that the tourist home has been rented.

For example, let's suppose that we have rented the house 215 days, and we have generated an expenditure of 2,000 euros in electricity. We would then have to divide the €2,000 by 365 (full days of the year) and multiply it by 215 (days it has been rented).

The result is the deductible expense: 2,000/365 x 215 = 1,178.08€

In the case of other management support services such as Polaroo software, they may also be deducted in proportion to the days of occupancy. And in the case of Internet service, it would be out of this calculation, because its cost exists regardless of its use, and could be fully deducted.

‍

Optimize costs and time with Polaroo software

Collect the necessary documents and bills for your next tax return, or optimize the cost of supplies and the management time you have invested in them, can be an impossible task. At Polaroo, we do this for you:

• We optimize your supply costs in the different supplies of your tourist homes.
• We collect all your supply bills and we send them by email so you can download them and consult them when you have to submit your next rent, or at any time.
• We make the calculations easier for you with personalized reports that you can get in 2 clicks from our specific tool for supply management.
• We give you access to an Account Manager to ask questions or request procedures when necessary.

If you want to know more, you can check out our page on solutions for vacation rental supply management and learn how we have boosted the growth of other tourism businesses.