Are Britons Being Banned From Renting Out Property In Spain?

There have been a few press headlines recently, both locally and in the UK, about a new ban on holiday lettings in Spain. Some of the headlines imply that Britons are being targeted.

There have been a few press headlines recently, both locally and in the UK, about a new ban on holiday lettings in Spain. Some of the headlines imply that Britons are being targeted.

In summary, what is happening is that owners will need to apply, and pay for, a licence from their local authority before renting out their property to tourists in future. Anyone who applies for a licence and meets the local conditions should still be able to rent out their property. This applies to all nationalities, including Spanish, who offer holiday lettings.

The new law is considered quite controversial, and many holiday homeowners are unhappy and worried about the new rules. Many blame the hotel lobby, who they believe have been putting pressure on the government after losing business to holiday lettings.

Bearing in mind that people coming to stay in Spain spend money in the local economy, and that this comes from people staying in apartments and villas as well as in hotels, the Spanish authorities are unlikely to want to shut such holiday lettings down.

In reality, this is most likely a revenue issue, with both the local and national governments desperate to increase revenue. What they are really after, though, is not so much what they will earn from the licences, but the resulting increase in tax revenue from the rental income declared by those seeking such licences.

Rental income is meant to be declared and taxed in Spain anyway, whether it is owned by a resident or non-resident. However many owners fail to declare the income or pay the tax due. The Spanish government estimates that it loses almost €3 billion in tax a year from undeclared holiday rentals, and they are now hoping to recoup this lost tax.

Once owners have applied for a licence, they will be in the system. It will be a simple matter for the tax authorities to compare tax returns with the licence records, and find anyone who still does not declare the income.

The second issue here is implementing a regulatory system for holiday lets in Spain. We expect such rentals to be licenced and meet health and safety standards in the UK, so why not here too?

It has been relatively easy to rent out property to tourists here in Spain, though, so the new rules will make life a little more difficult. Besides applying for the licence, it is reported that owners will also need to meet health and safety standards, and be contactable 24 hours in case of an emergency like a flood or fire. They should also have rental insurance to cover public liability.

Although this has made the headlines in recent weeks, the Spanish law La Ley de Medidas de Flexibilización y Fomento del Mercado del Alquile was actually passed last June.

Properties rented to tourists are now regulated by the local autonomous region, and different regions can apply their own rules and have had different timeframes for implementing them.

The Balearics, Canary Islands and Cataluña have already implemented their new rules. There have been reports of tough fines on those who do not meet the conditions. The Daily Mail mentions fines of up to £15,000 (around €18,000) each.

Here in Andalucía, the rules are scheduled to come into effect this spring. It not yet clear what the local rules and restrictions will be.

An editorial in Sur in English on 7th January quoted Miguel Rodriguez, a Seville lawyer, as saying: “There is still further clarification of the legislation needed, but it has been widely suggested temporary leases of apartments in Andalucía will not be permitted unless you own three apartments in the same building, meaning that it will be mainly companies, not individuals, who will be able to rent tourist properties or rooms. However, this too is likely to vary from province to province within Andalucía.”

However, we have yet to see how it will turn out.

We also still need to see what licence fees will be here. According to reports, looking at regions which have already imposed the law, the licence is a one off payment of between €177 and €500.

Depending on what local rules are confirmed, this many not affect you as much as many fear. However, if you do own rental property, this may be a good time to consider your assets going forward and whether you are using your capital in the most tax efficient way possible.

22 January 2014