How to claim the VAT from buying a Spanish new property, and renting it out

We would like to inform you that the Spanish Tax period goes from January to December and it is broken into 4 different natural quarters (Jan, Feb. & Mar.; Apr., M. & Jun.; Jul., Aug. & Sept.; Oct., Nov. & Dec). Every one renting out a property though a property management service company located in Spain is liable to present quarterly tax returns which are due to present within the following 20 days after the end of each quarter. So that, first quarter tax returns will have to be presented before the 20th/04; second quarter tax return will be due to be presented before the 20th/07; etc.

Accordingly to the Spanish Law and in case that you rented out your Spanish property through a property service company along the following 9 years, you will be entitled to claim the VAT paid to the promoting company at the moment of buying the property. Every year you will be entitled to claim 1/9th the total VAT sum paid at the purchasing moment.

All documents needed to do so are written as follows:

  • Spanish NIE numbers registered for VAT purposes.
  • Copy of Title Deeds.
  • A Spanish contract related to tenancies services showing the Spanish VAT tax man your renting and economical intentions at the purchase moment.
  • Invoice from the promoting company showing the purchase price and the VAT paid and added on top of this price.

Upon the even the house were temporarily rented during a particular time period in the year, the property owner will be liable every month to issue an invoice, and pass it onto the chosen tenancy service company. This invoice will amount the tenancy earnings corresponding to such period + 21% VAT which will always be added up and paid on top of the rental sums written on it. The tenancy service company will also be liable to retain 19%-24% Income Tax at source that will be paid to the Spanish Income Tax Department as the owner of the property were a NON-RESIDENT Spanish tax payer. So that, i.e. 1000 Euros rental earnings will be 21% VAT added on top by the Tenancy Service company used resulting 1210 Euros; 24% tax at source will be retained of this sum, and 916,60 Euros will be due to receive by the property owner. The property owner will offset the 210 Euros from the total VAT credit coming from total VAT paid at the buying moment, and the service company will be liable to pay the 24% tax (290,40 Euros) towards the Spanish NON-RESIDENT income tax man on behalf of the property owner. In the end of the year, this service company should give an Annual Certificate of Earnings and taxes paid to the property owner in order to permit this person declaring such earnings in the Country where he/she lives as Tax Resident.

Any costs needed to rent the property out will be VAT deductible. In other words, any VAT paid to the Electricity Companies, to your Chartered Accountants or to any company towards repairing or maintaining the property will be off set against the VAT paid on top of the rental earnings.

Any money invested into the property to facilitate its renting such as furniture, air conditioning machines, white goods, etc will mean deductible VAT as long as it is on a former invoice from the supplying of those products.

THIS ARTICLE IS WRITTEN BY MR. EUGENIO PEDREÑO NAVARRO, ECONOMIST & CH. ACCOUNTANT, UNDER REGISTERED NUMBER 1397 IN THE MURCIA REGION ECONOMISTS SCHOLARSHIP. IT IS WRITTEN ACCORDINGLY TO VAT LAW NUMBER 37/1992 arts. 4-Uno, 5-Uno, 20-Uno, 92-Uno, 93-Uno, Cuatro, 111-Uno & RIVA RD 1624/1992 (29/12/1992; BOE 31/12), Titulo VII, arts. 27-1, 2 y 3 & NUMERO DE CONSULTA VINCULANTE V0263-05 (22/02/2005).