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Holiday rental taxes

If you’ve never been self-employed back home (or even if you have), taking care of your finances and tax payments for your holiday rental can seem intimidating.
 
I’m here to make it simple for you, and can advise you and guide you through each year, so nothing gets forgotten and you can feel safe and secure in the knowledge that everything is being taken care of.

So, how can I help?

Register with the tax office and for IGIC

When you first start renting your holiday home I’ll register you with the tax office and also for IGIC, the local equivalent of VAT. If you’re an individual owner or part of a married couple, you won’t have to apply it until you earn above 30,000€ in a year.

However, if you co-own with family members or friends, or as a company, you’ll apply IGIC from day one. 

I can advise you if and when you need to start applying it when we have our initial consultation. 

Annual tax for rentals

As a non-resident with a rental property, you’re obligated to submit an annual tax return between the 1st and 20th of January each year, for the income received during the previous year.

If you’re an EU citizen (or from Norway or Iceland), you’ll pay 19% tax on your income and can deduct certain expenses to help reduce your tax bills.

If you’re a non-EU citizen (including British), no expenses can be deducted and you’ll pay 24% tax on all your earnings. It’s important to bear that in mind when you set your rental prices.

I’ll guide you on deductible expenses where applicable and collect your information at the end of the year to submit the returns on your behalf.

I’ll also submit the two annual informative declarations required at the start of the year, to confirm your income and expenses for the previous year. Don’t worry, I’ll always remind you to send me the figures I need, so you don’t have to worry about keeping track.

Spanish Property tax

A lot of owners are still not aware of this, but if you own a property in Lanzarote which you don’t rent out, you’re still obligated to submit an annual return based on the cadastral value of the property.

This is the Spanish Property tax, or Imputed Income tax. The imputed income is 1,1% of the cadastral value. After calculating the imputed income, we can work out how much tax you’re due to pay based on your non-resident tax rate.

For residents of the EU, Norway and Iceland, the rate is 19%. For all non-EU citizens it’s 24%.

If you are a couple owning a property, both of you must make a declaration.

We can find the catastral value using your IBI receipt (the equivalent of your council tax), which is paid each year.

This Spanish Property tax is not related to income or salary, and is still payable on top of any tax due on rental income if you do decide to rent out the property.

If you do rent out your holiday home, I can help you make sense of your obligations and submit the tax declarations on your behalf.

IBI and Basura

If you own a home here in Lanzarote you’ll need to pay your rates each year. The IBI is the equivalent of the council tax back in the UK and the Basura is a contribution towards the local rubbish collections.

Capital gains tax

If and when you choose to sell your property in Lanzarote, you’ll need to pay a capital gains tax of 19% on the profit made. 

On the day of sale, it’s common practice for the purchaser (or their lawyer) to withhold 3% of the amount of sale which will be paid to the Tax office as an estimate of the tax you’re due to pay. We then calculate the exact amount, and either request a refund or submit the balance due.

I can take care of this for you and also deregister you from the tax system if you’ll no longer own property on the island.

You can deduct fees associated with the purchase and the sale, for example, notary and legal fees. We’ll advise you on all possible deductions when we meet. 

Wealth tax

The wealth tax, also known as the “Impuesto de Patrimonio” is a tax on your assets, including property, investments, savings, cars, boats, artwork, jewellery etc. when their combined worth exceeds 700,000€. 

The rate of tax charged is progressive, from 0,2% to 3,5% depending on the level of wealth. 

It’s a compulsory tax which must be filed for each individual, meaning you can’t do a combined return with your spouse or partner. 

I can take care of all the calculations on your behalf and submit your return for the deadline at the end of the year. 

Payment of debts

If you haven’t been paying your taxes because you weren’t aware of your responsibility, please don’t be frightened to contact me, I’m here to help. I’m not the tax office or the town hall, I’m on your side and I can help you sort out whatever needs to be taken care of. It’s much better to clarify your situation rather than get a sweat on every time the mail man arrives, waiting for a letter or a fine to appear.

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Need one of the services above, or advice on the
best way to handle your accounting or taxes as a
Lanzarote holiday home owner? Book your consultation and I’ll take care of the rest.

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