Tax Agency and holiday rentals

The Tax Agency has put holiday rentals in the spotlight in recent months. With 2018 and 2019 being so turbulent in legislative matters, it's normal for hosts of tourist apartments to be somewhat confused. You can also download it for free here.

If you're asking yourself questions like: Do I have to declare VAT? How do I declare the income from my tourist apartment in my personal income tax? What is ITP? Then you should read this post.

These are some of the questions that holiday rental hosts may have about the Tax Agency, and we are going to help you answer them.

It will help guide you in understanding the 2019 changes regarding the taxation of tourist accommodation.

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Tax Agency and holiday rentals, in summary

In the guide to taxation of tourist housing, we will focus on the key points to avoid errors with the Treasury. You can always correct them in the future. Or you can ask your administrative agency for help. But if you do it right the first time, you will avoid problematic situations with the Tax Agency.

This guide is aimed at rookie or veteran hosts who want to know more about the taxation that the Tax Agency applies to holiday rentals. We will explain step-by-step and in simple language how tourist housing rentals are taxed in Spain. More specifically, we will discuss the different taxes that apply to the rental of tourist apartments.

Rental of housing for tourist use and seasonal rental: What are the differences according to the Tax Agency?

Seasonal rental and rental of housing for tourist or holiday use. Is it the same for the Tax Agency? Keep reading to resolve this doubt that many hosts have when defining their apartment before the Administration.

Unlike housing rental contracts (for permanent use), holiday housing rental (or for tourist use) is not governed by the Civil Code nor the Urban Leases Law (LAU). While in seasonal housing rental, some parts of the LAU do apply. Let's break it down!

Seasonal housing rental

What do we mean by seasonal housing rental? We're talking about cases where the purpose of the accommodation is to temporarily cover housing needs. With a shorter duration than general leases but longer than tourist housing rentals.

Until 2013, there were no differences between tourist housing rental and seasonal rental. The former were equivalent to the latter and were subject to the LAU. It is true that there were some points, such as the administrative authorization of the Autonomous Community, but in general, these leases were mainly subject to civil regulations. However, with the law to liberalize the housing rental market, this changed.

Let's see how tourist housing rental and seasonal rental differ today.

Housing rental for tourist use

With the entry into force of L4/2013, the Law for the Liberalization of the Housing Rental Market, the LAU was modified, and housing rental for tourist and seasonal use was removed from the civil sphere. From 2013 onwards, all holiday and seasonal rentals fell under the regulatory competence of the Autonomous Communities.

In fact, since the publication of the new law, the Canary Islands, Castile and León, the Basque Country, and Andalusia have regulated tourist housing rentals. Additionally, Catalonia and the Community of Madrid plan to approve new regulations soon. For more legal details, you can consult the information center for tourist housing legislation.

Urban Leases Law and holiday rentals

As we explained before, until 2013 there were no differences between tourist housing rental and seasonal rental. They were equivalent, and both were subject to the Urban Leases Law. That is to say, for the Tax Agency, these two modalities of holiday rental were the same. However, the 2013 law for the liberalization of the housing rental market drastically changed the landscape.

With the entry into force of Law 4/2013, the Law for the Liberalization of the Housing Rental Market, the LAU was modified. In essence, housing rental for tourist use was removed from the purely civil sphere. From 2013 onwards, all housing rentals for tourist use were subject to the regulations of the Autonomous Communities... Provided they developed such regulations.

There are communities like the Canary Islands or the Basque Country that already have approved legislation on the matter, while Catalonia or Madrid are currently working on it.

How does the Tax Agency apply the LAU to your holiday rental?

In this regard, tourist housing rental is regulated by this specific regime – which is what the Tax Agency follows – as established in article 5e) of the LAU.

The temporary assignment of the use of a fully furnished and equipped dwelling in conditions of immediate use, marketed or promoted through tourist offer channels and carried out for profit, when subject to a specific regime derived from its sectoral regulations.

Article 5e) Urban Leases Law

But what about my autonomous community's regulations? Practically all Autonomous Communities have developed their own regulations, so you must know which one applies to your region.

VAT and holiday rentals

The significant growth of tourist housing rentals in recent years has raised doubts about whether you, as the owner, have to declare VAT on the expenses and income generated by your accommodation. In this post, we explain the relationship between VAT and holiday rentals for the Tax Agency.

The VAT Law (LIVA) establishes that whoever carries out tourist accommodation leases has, for VAT purposes, the status of an entrepreneur (art 5.one.c LIVA). Insofar as they are carried out by entrepreneurs, "tourist accommodation leases are subject to VAT" (art 4.one LIVA).

Subjection to VAT determines non-subjection to the concept of Onerous Property Transfers of the Property Transfer Tax (ITP), unless the VAT exemption applies (art 4. four LIVA).

What a mess! So, do holiday rentals incur VAT or ITP? The short answer is that it will bear VAT or ITP depending on the services you offer. We'll explain it in detail below!

Services for which you must declare VAT to the Tax Agency for your holiday rental

In general, VAT should be declared to the Tax Agency for those tourist accommodations that provide "complementary services typical of the hotel industry". Accommodation services are characterized by extending customer attention beyond the mere provision of a property or part of it.

That is to say, the accommodation activity is characterized, unlike the housing rental activity, by normally including the provision of a series of additional services beyond the mere rental of the dwelling.

• Reception and permanent and continuous customer service in a dedicated space
• Periodic cleaning of the property and accommodation
• Periodic change of bed linen and towels
• Laundry
• Luggage storage
• Newspapers
• Reservations
• Food and catering services

You can consult the following links from the Ministry of Finance, which explain which services are typical of the hotel industry, and therefore, subject to VAT: [1] and [2].

If you provide these types of services, you will not be exempt from VAT and must charge VAT at the reduced rate of 10%, as hotel establishments do. You can check the binding consultation of the Tax Agency.

Services for which you do not have to declare VAT on your tourist apartment to the AEAT

However, if you do not provide any of the services listed in the previous point but do provide any of the following, which are not considered complementary to the hotel industry, you will be exempt from charging VAT and will not have to declare it on the invoices of your holiday rental to the Tax Agency.

• Apartment cleaning service provided at the beginning and end of the contracted period for each tenant.
• Linen change service in the apartment. Provided at the beginning and end of the contracted period for each tenant.
• Cleaning service for the common areas of the building (entrance hall, stairs, and elevators). As well as the urbanization where it is located (green areas, access gates, sidewalks, and streets).
• Technical assistance and maintenance services. For example, punctual plumbing, electricity, glazing, blinds, locksmith, and appliance repairs.

If your accommodation only offers these VAT-exempt services, then you do not have to file or pay VAT. However, tenants should pay ITP, which is transferred to the Autonomous Communities.

Economic Activities Tax and tourist rental

First, let's explain what IAE is and what income this tax covers. Then we will go into detail about the relationship between the Economic Activities Tax (IAE) and holiday rentals for the Tax Agency.

The IAE is a “direct tax […] whose taxable event is the exercise in national territory of business, professional, or artistic activities, whether or not carried out in a specific location and whether or not specified in the tax rates.” For the Tax Agency, the economic activities taxed by the IAE are those that involve the self-use of means of production and/or human resources.

Furthermore, RDL 1175/1990 establishes various rates – or categories of business activities – taxed with different tax rates.

Fortunately, individuals are exempt from this tax, so we will comment on the corresponding heading in case you are engaged in an economic activity.

IAE for holiday rentals with accommodation services

If you offer any of the services that imply charging VAT in your tourist accommodation, this point will be relevant to you:

The economic activity of your tourist apartment is classified in group 685 of Group 68 of the first section of the IAE. That is, it is an "Extra-hotel tourist accommodation," classified under "Accommodation services." Basically, it's a catch-all category that includes all accommodation services other than hotels and motels, hostels and guesthouses, inns and boarding houses, apartment-hotels, organized companies or agencies for the exploitation of private apartments, and camping-type tourist camps.

In conclusion, if your tourist apartment offers accommodation services, your economic activity is classified in group 685 of the first section of the IAE rates.

IAE for tourist apartments without accommodation services

In this case, you will not need to register with the IAE to keep your holiday rental up to date with the Tax Agency. Additionally, you will declare your income along with the rest of your earnings once a year.

IAE for holiday rentals leased to a management company

In this case, we analyze when the owner of a tourist property leases it to a person (natural or legal) and it is this person who exploits it as an extra-hotel establishment, contracting with tour operators, OTAs, and assuming the operational risks.

Thus, the owner of the tourist apartment carries out an activity of real estate rental. It is classified under heading 861.2 of the first section of the IAE. Specifically, "Rental of industrial premises and other rentals NCOP". For personal income tax purposes, no economic activity will be carried out. However, they will have to invoice their tenant for the rental of the property with a 21%. In addition, depending on the case, including or not including withholdings.

In conclusion

Similarly to the case of VAT, the IAE and the taxation of tourist housing rentals for the AEAT depend on the type of services offered:

• You offer accommodation services. Then your activity is categorized as "Extra-hotel tourist accommodation."
• You do not offer accommodation services. Then your activity is "Housing rental." If you have a full-time employee, otherwise you will not register with the IAE.
• You lease the tourist apartment to a third-party company – which exploits it as tourist accommodation. Then your activity is "Rental of industrial premises and other rentals."

Personal Income Tax and holiday rentals

Your holiday rental, up to date with the Tax Agency

Download the tax guide for tourist accommodations for free and become a professional host. More than 30 pages with the keys to your accommodation's taxes (IAE, IRPF, VAT, etc.).

Download free guide

And May arrives: spring, allergies, warm weather... and the income tax declaration! If you have started your tourist accommodation, then you will have to declare it in your personal income tax return. What determines how it is taxed? Guess what, the services you have provided ;-).

Declaring income from tourist apartments in personal income tax without accommodation services

If your tourist accommodation does not offer accommodation services, the income derived from the rental of the tourist apartment is considered income from real estate capital. For example, cleaning services performed before the arrival of tenants or after their departure, or the delivery and collection of keys at the time of check-in and check-out of guests, are not considered accommodation services.

Generally, if you are the owner of the tourist apartment, you, as the titleholder of the property, will have to declare the difference between the gross income and the deductible expenses of your holiday rental to the Tax Agency in your personal income tax declaration.

This result cannot be subject to the 60% reduction applied to habitual residence rentals – as it is a tourist apartment, and therefore covers a temporary housing need.

Periods during which the tourist apartment has not been rented generate imputation of real estate income, just like any other dwelling. In this case, the amount will be the result of applying the corresponding imputation percentage to the cadastral value of the property. Additionally, you will have to weigh it based on the number of days it has not been leased for tourist purposes.

Personal Income Tax and holiday rentals with accommodation services

If your tourist apartment offers accommodation services to your guests – periodic cleaning or linen change, catering, or leisure activities. Then, the Tax Agency will consider the income from your holiday rental as income from economic activities in your personal income tax declaration.

Reporting obligations

Since 2018, a new obligation to provide information on tourist housing has been established. For this purpose, the platform you use (Airbnb, Booking, etc.) must submit form 179.

The submission of form 179 – concerning reporting obligations – is mandatory for the 2018 income tax declaration, to be filed in 2019. Submitting it does not exempt you from declaring the rest of the income from your tourist dwelling (Personal Income Tax, non-residents, Property Transfer Tax, etc.).

Intermediaries of holiday rentals will inform the Tax Agency about each transfer of property for tourist purposes located in Spanish territory. This is what is known as reporting obligations. This includes transfers of tourist housing and seasonal rentals.

The information to be provided in the new form 179 includes:

• Owner of the property
• Holder of the right under which the property is transferred (if different from the owner of the property)
• Identification of the assignee persons or entities.
• Property subject to transfer.
• Number of days the property is enjoyed for tourist purposes
• Amount received by the transferring right holder
• Contract number assigned by the intermediary
• Start date of the transfer
• Intermediation date
• Identification of the payment method used

You can check an example of Form 179 for reporting obligations here [PDF].

Form 179

Many doubts arise regarding the Quarterly informative declaration of the transfer of use of dwellings for tourist purposes, in this regard both the AEAT, and the DGT in its Binding Consultation V3083-18 have clarified who is obliged to present form 179.

The most noteworthy aspects of both pronouncements are the following:

Your holiday rental, up to date with the Tax Agency

Download the tax guide for tourist accommodations for free and become a professional host. More than 30 pages with the keys to your accommodation's taxes (IAE, IRPF, VAT, etc.).

Download free guide

Who must submit form 179?

Individuals and entities that act as intermediaries between the transferors and transferees of the use of dwellings for tourist purposes, as established in sections 2 and 3 of article 54.ter of the General Regulation on tax management and inspection procedures and development of common rules for tax application procedures, approved by Royal Decree 1065/2007, of 27 July, are obliged to submit form 179.

Intermediaries for the purpose of the obligation to submit form 179 are individuals and entities that provide the intermediation service between transferors and transferees of the use of dwellings for tourist purposes, whether for consideration or free of charge.

In particular, this will include persons or entities established as collaborative platforms that mediate in the transfer of use and are considered providers of information society services, regardless of whether or not they provide the underlying service subject to intermediation or impose conditions regarding the service's transferors or transferees concerning price, insurance, deadlines or other contractual conditions.

Therefore, this includes not only digital intermediaries (especially collaborative platforms), but also any other (analog or traditional intermediaries) whose activity in the operation consisted of the effective confluence between supply and demand for the transfer of said dwellings.

Who are considered intermediaries?

Regarding the previous point, the STS of October 21, 2000 (Rec. 3023/1995) states that:

In the mediation or brokerage contract, the mediator must primarily limit themselves to connecting prospective buyers and sellers of a specific object, but in any case, the activity must be aimed at achieving the fulfillment of the final contract, and this is understood by modern doctrine inasmuch as it states that the legal relationship between the client and the mediator does not arise exclusively from a contractual mediation business, since the obligations and rights also require that the intermediary effectively contributed to the parties concluding the business (Judgment of October 2, 1999; and this Chamber has repeatedly declared that said contract is subject, regarding the accrual of fees, to the suspensive condition of the desired contract's conclusion, unless expressly agreed upon in judgments of October 19 and November 30, 199, March 7, 1994, July 17, 1995, February 5, 199 and April 30, 1998.

Furthermore, it states that "mediation is consummated when the contract to which the mediation is directed is granted or perfected by the concurrence of offer and acceptance, or in terms of the STS of 20-5-2004, the right to perceive the commission arises when the unequivocal acts of mediation crystallize in the operation in which the agent intervened."

Therefore, only someone who receives remuneration based on the conclusion of the mediated contract can be considered an "intermediary".

In accordance with the jurisprudence of the Supreme Court regarding real estate brokerage contracts, the intermediary who receives remuneration or commission for the successful completion of a result, in this case, the effective contracting between transferor and transferee for the temporary transfer of use of all or part of a dwelling for tourist purposes, will be subject to this reporting obligation.

Platforms, hosts, and form 179

Those websites or collaborative platforms that only provide mere digital housing accommodation for tourist uses will not be obliged to submit the informative declaration (form 179) of holiday rentals to the Tax Agency.

In the case of an owner who leases their home to a real estate manager ("Property manager") for a fixed monthly amount and, subsequently, this real estate manager, based on the right of sublease derived from the contract concluded with the owner, subleases it for tourist purposes by their own means, neither of them has to submit form 179.

In this case, the Manager, as the holder of a sublease right, transfers to a third party, the assignee, the temporary use of all or part of the furnished and equipped dwelling in conditions of immediate use, becoming ultimately the transferor of the use of dwellings for tourist purposes, and therefore cannot be considered an intermediary for these purposes.

If the real estate manager uses an online platform that receives its remuneration or commission for the effective formalization of the transfer of use of dwellings for tourist purposes between the Manager, acting as transferor, and the tourist assignees of the dwelling, without having any right of use or enjoyment over the dwelling transferred for tourist purposes, but merely provides an intermediation service necessary to conclude the celebrated contract of transfer of use between the Manager and the assignee, receiving remuneration or commission for it, then said online platform provides an intermediation service in the transfer of the use of dwellings for tourist purposes, being obliged to submit the informative declaration (form 179) in accordance with article 54 of the RGAT.

Unless a better opinion.