Taxation on Rented Property Tenerife - all the things you'll have to pay

taxation on rented property tenerife

Let's start off with a very important message to all owners of property in Tenerife who are not resident on the island, or Spain in general. Even if you just use it yourself for a couple of weeks a year, leaving it empty for the rest of the time, you are still deemed, in Spanish law, to have a rental income.

You may think this extremely unfair, but there it is. This "deemed income", or renta imputada is thus subject to non-resident income tax.

What's Even More Unfair Is This:

The Spanish Tax Office sends out no reminders or demands for these tax payments. It's your responsibility to get hold of the appropriate form (Modelo 210), fill it in and pay the required amount.

Unpaid taxes mount up - together with increasing fines - for non-payment. You may get away with this for years, but they'll catch up with you eventually. They will certainly discover these tax arrears should you decide to sell your property and you'll be hit with an exhorbitant amount of money to pay. This tax bill must be settled before they'll allow transference of ownership.

How This Tax Is Calculated

It is based on the catastral value of your property. This is its rateable value. Hopefully, you'll have been paying your rates bill (see below) every year and, on the receipt you receive on payment, this catastral value will be displayed. It will also state when it was last revised and this is important for this calculation.

If your property has not been valued since 1994 then you pay slightly more (2%) of the value. It's more likely that it has been more recently valued, in which case the percentage will be 1.1.

A sample calculation goes like this:

Rateable value: 100,000 euros
1.1% of this equals 1,100 euros
Divide by 2=550 euros
Multiply by 0.2475 (the current tax rate being 24.75%)=136.13 euros, the tax payable

The form can be accessed online here and you can print it off and fill it in. However, when you see the form, you may be inclined to appoint a fiscal representative to deal with it.

taxation on rented property tenerife

If You Rent It Out

If your property earns you an income with holiday lets, then that is simply taxed by honest-to-goodness income tax, which, for non-residents, has been, since the end of 2011, 24.75%.

Since the beginning of 2011, non-residents earning an income from Tenerife property are allowed to deduct expenses, such as electricity, water, rubbish collection and local rates, from their payment. You must, however, prove your non-residence by otaining a certificate of fiscal residence from your local tax office and this must be presented along with your Modelo 210 form.

Wealth Tax

More correctly known as the Patrimonio, this is a tax on total assets. From 2008 until September 2011, the Spanish Government reduced the rate of this to 0%, effectively removing it as a factor in your tax expenses. They didn't totally abolish it, notice and, wouldn't you know it, they have now put it back up, to between 0.2 and 2.5%, depending on several factors.

This percentage applies to such things as property and savings, but only if the total assets exceed a value of 700,000 euros. Properties worth less than 300,000 euros are exempt, too. So, it's very likely that, even though it's been, sort of, reintroduced, you won't be affected.

taxation on rented property tenerife

Local Rates

The Spanish term for these payments is Impuesto sobre Bienes Inmuebles, or IBI and is the equivalent of the UK's council tax. Similarly, the payment is to cover the upkeep of your community - such things as rubbish collection - and public services.

It is set by your local council and takes certain factors into consideration, such as the rateable value of your property.

If the property is situated in a place designated a "tourist area", the IBI will be much higher than if it were in a designated "residential area".

Payment is made yearly, theoretically in response to a reminder from the council. In my experience, these reminders never get sent out, so you have to do your own investigation as to when they're due. Failure to pay on time will incur a penalty of between 10 and 20%.

They don't make it easy for you, do they?

Capital Gains Tax

Even if you're a non-resident of Tenerife and you sell your holiday apartment, you'll be liable to pay Capital Gains Tax, which has recently been raised from 19% to 21% on any profit made from the sale.

I say again, this is a guide only. You should seek help and advice from a tax professional and use his services.

taxation on rented property tenerife