Buying Property in Spain to Rent Out

According to World Economic Forum, buying Property in Spain to rent out means good business: investing in Spain is a safe value; but read on!
Article Published: 22 May, 2020, Updated: 19 Jan, 2023 under Residential Lettings

According to the WEF (World Economic Forum), Spain has continued to be the most competitive country in the tourism sector, with it's wonderful coasts, excellent gastronomy, culture and sun. It is the second most visited country as far as tourism is concerned, and has developed infrastructure for an economy focused on tourism. Spain has been leading this ranking for four years as the country that best combines all its resources. For these reasons, buying a property in Spain to rent out is a reasonably good bet

Buying Property in Spain to Rent Out: investing in Spain is a safe value


 The price of property in Spain has remained stable over the last few years and many investors are thinking of buying to rent or enjoying the property and renting it out while they are away.  There are a number of different options or forms of renting-out property in Spain, though, do remember to consider the pitfalls of buying a property in Spain, before proceeding.  

Long-term Renting of property

When the parties to a lease prefer stability and a longer duration of the contract, with the current applicable regulation, the tenant has the right to remain in the property for a period of at least 5 years, unless he wants to end it before that date communicating this decision with a month in advance of the end of the contract or required periods. This contract is exempt from VAT and the taxation type is the Patrimonial Transmissions tax that is regulated by the Regional Government in which the property it is located.

If you are considering investing in a property for the purposes of buy to let in Spain targeted at long term rentals, larger towns and cities are a better option than rural property.

Seasonal Renting

The use in this case is different from the abovementioned long-term renting scenario. It could be for summer holidays, or for other different purposes of the tenant who needs the property for a short period due to work transfer, school term, etc. In this type of renting, no complementary services are offered, such as cleaning, reception, and the availability of the property for rent cannot be announced on the tourist rental's platform.

The contract is governed by the free choice of the parties. To give an example, the property rented in summer on the beach for a week, fortnight, or month, which does not have other complementary services of cleaning, change of sheets or telephone switchboard, nor is it advertised on tourist offer channels, will be a seasonal rental. It is exempt from VAT, the tenant will only pay the agreed rent, as long as the lessor is a natural person and not a business/company.

Rental of Tourist Accommodation - Holiday Rentals

These leases are subject to the legislation produced by the Regional Government in which the property is located, so it may be different depending on where the property is located.

At the regional Government level, a lot of regulations are being passed to regulate tourist apartments, so if you opt for this type of rental, you should obtain information on the regulations of the local government to know what obligations and requirements you need to obtain the necessary tourist license.

In this category you will find houses or apartments destined for immediate use and marketed or promoted in tourist supply channels with a profit-making purpose.

It will be necessary to present tax returns at the beginning of such activity, for any modification, or cessation of the same. The activity is subject to VAT and the relevant tax returns must be presented. The amounts that the owners receive as income are taxed under Income Tax, as real estate capital. And in the case that the rent is not limited to the mere use of the property and provides services typical of the hotel industry, it would also be considered an economic activity.

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