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PROPERTY

Spanish property news roundup: New laws, taxes and rental benefits

Spain’s government has proposed a series of major changes to the country's housing laws, from price freezes to €250 rental allowances, big tax hikes on empty homes and more.  

Spain's Prime Minister Pedro Sanchez announced on Tuesday young mid-income workers will get a €250 monthly rental allowance if his government's new housing law is approved. Photo: JOHN THYS / AFP / POOL
Spain's Prime Minister Pedro Sanchez announced on Tuesday young mid-income workers will get a €250 monthly rental allowance if his government's new housing law is approved. Photo: JOHN THYS / AFP / POOL

Spain’s left-wing coalition government of PSOE and Unidas Podemos on Tuesday agreed on the country’s Housing Budget for 2022 and with it big changes to the country’s property laws.

The proposed new legislation still has to be approved by the Spanish Cabinet, with no date set yet, lots of questions still to be answered and so far plenty of opposition from right-wing parties PP and VOX. 

The Bank of Spain has also warned that studies conducted in the US, UK and France have shown that measures such as state rental subsidies end up increasing prices.

But if Pedro Sánchez’s government gains the support of the Basque Nationalist Party (PNV) and the Republican Left of Catalonia (ERC), these new laws signalling increased regulation of Spain’s property market will come into force in the near future. A win for some, a loss for others. 

Here’s a round-up of the main proposed changes to property laws in Spain:

Price freezes with some benefits

Spain’s future housing law has a clause focused on the regulation of rental prices for large property holders, those with more than 10 homes. 

If the measure is approved by the Spanish cabinet, they must by law lower rents based on the reference index drafted for all contracts in property markets that are under pressure. 

Regional governments will be responsible for informing the national government of where rental prices are spiking and if they want to introduce the rent cap.

In addition, smaller property holders who are letting out real estate in neighbourhoods where prices are ballooning will also have to freeze rents.

If they’re willing to draw up a new contract with a lower monthly rent, tax credits of up to 90 percent on their personal rental income (IRPF) could apply to these landlords.

As explained by Spain’s Minister of the Presidency Félix Bolaños, the new law will “freeze and reduce rental prices “, with “a very powerful package of tax credits for property owners to willingly introduce price reductions”.

Tax on empty homes 

Spain’s potential new housing law will include a tax on empty homes through an IBI surcharge of up to 150 percent with some exceptions.

IBI stands for Impuesto sobre Bienes Inmuebles in Spanish, which translates to tax on property goods, but it also goes by the name SUMA.

It’s a local tax which has to be paid once a year by all property owners in Spain, and it serves as a benchmark to calculate all other Spanish property-related taxes.

As the IBI amount is decided by the town hall in which your property is located, there can be differences of hundreds of euros between municipalities, and there’s also likely to be opposition to the proposed new tax on empty homes. 

Madrid’s PP mayor José Luis Martínez-Almeida has already promised that authorities in the capital will introduce all the necessary measures so that people in Madrid “aren’t affected by this unjustified increase of the IBI by Spain’s national government”.

READ ALSO: How to pay less Spanish IBI property tax

A young couple and their two infant children at the window in an occupied building in Sanlucar de Barrameda, near Cadiz. Photo: AFP PHOTO/ CRISTINA QUICLER
According to a September survey by Spanish property engine Fotocasa, 62 percent of under 35s in Spain face financial obstacles when buying or renting a property. Photo: Cristina Quicler/AFP

More public housing 

Thirty percent of new builds will have to be social housing projects meant for rental, Spain’s new housing law states, a decision which still has to be approved by the Spanish cabinet. 

Spain has the lowest amount of social housing in the EU with 290,000 units, only 1.1 percent of all properties in the country. 

To put it into context, 30 percent of homes in the Netherlands are social housing, 24 percent in Austria, 20.9 percent in Denmark, 19 percent in Sweden, 17.6 percent in the United Kingdom, 16.8 percent in France and the EU average is 8 percent. 

€250 monthly rental allowance

Spain’s Prime Minister announced on Tuesday that as part of his government’s wave of proposed changes to housing laws, 18 to 35 year olds who earn below €23,725 gross per year will be able to get a monthly discount of €250 off their rent.

Tenants would be able to claim a maximum of €6,000 in total over a two-year period whilst vulnerable families will receive extra state aid to cover “up to 40 percent” of their monthly rent.

READ MORE: Spain to give young mid-income earners €250 monthly rental allowance

Property price hike in Malaga 

In other property news, Malaga province has seen the biggest real estate price increases of all 50 provinces in Spain over the past year, up 9.2 percent compared to 2020 and 13 percent higher than in 2019. 

The average price of €2,433/sqm makes the coastal province the most expensive in Andalusia and the sixth most expensive in Spain after Guipúzcoa, the Balearic Islands, Madrid, Barcelona and Vizcaya, new figures from Idealista show. 

According to data from Spain’s Ministry of Development from the first quarter of 2021(the latest figures available), the average price of a home in Málaga province is €240,238.

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PROPERTY

Is it better for landlords in Spain to rent to temporary or long-term tenants?

If you own property in Spain that you don’t live in yourself, it’s likely that you’ll be renting it out, but is it best to rent it out on a temporary or long-term contract?

Is it better for landlords in Spain to rent to temporary or long-term tenants?

Your decision to rent out to temporary or long-term renters will of course be influenced by whether or not you intend to use your property yourself during parts of the year, but if not, it’s worth keeping in mind what the differences are. 

Besides the duration of the contract, the laws that govern each situation are different and the tax implications differ too.

READ ALSO: What are the requirements for landlords to rent out a property in Spain?

Long term contracts

Renting out long-term is governed under the Urban Leasing Law (LAU), which aims to provide shelter to families permanently and indefinitely.

It is possible to update the rent each year, depending on the price index or specific regulations at the time.

For example, in 2024, there is currently a three percent price cap. This means that you won’t be able to raise the rent on contracts that are already in force above three percent. The rental cap, however, does not apply to new contracts signed, or those signed after 2019.

Long-term contracts have a minimum duration of five years, however, your tenants can leave any time after six months as long as they give 30 days’ notice.

If you decide you need the property for yourself, you must wait until one year has elapsed on the contract and then give your tenants two months to vacate the property.   

If you decide to sell the property on the other hand, your tenant has the right to stay for up to three months or until the property is sold.

READ ALSO – Renting in Spain: When can a landlord legally kick out a tenant?

Temporary contracts

Regarding temporary rental, the law frames it under the label “rental for use other than housing”.

Temporary contracts must be for a minimum of 32 days, any shorter than this and they would be considered tourist rentals. Rentals to tourists are covered under a completely different set of rules and regulations and in many places require a tourist licence too.

READ ALSO: The rules for getting a tourist licence to rent out your Spanish property

Temporary contracts must also not be longer than 11 months. Beyond that time it would be considered a long-term rental and a long-term contract up to five years like above, would need to be issued.                                                                                                 

There is more flexibility when setting rents for temporary contracts. These are typically higher than long-term rents because of various factors, such as the addition of furniture, bills and wi-fi being included and the fact that they’re often rented out in high season. 

It’s worth keeping in mind that a high tenant turnover carries a slightly greater risk than when you rent your property out long-term. You or a management company will need to be more involved too.  

READ ALSO: Why you should consider renting out your property in Spain to students

It’s important to consider taxes when deciding to rent out to temporary or long-term renters. Photo: Andrea Piacquadio / Pexels

Declaring tax on rent from long-term contracts

You must pay taxes on your net income if you rent out long-term.  

This means adding up all the gross income for the year and deducting all the expenses involved with the rental. The following expenses are deductible:

– Waste collection fee
– Real Estate Tax (IBI)
– Insurance in case your tenants can’t pay the rent
– Home Insurance
– Community expenses
– Mortgage interest
– Real estate commissions

As the apartment serves as the tenants’ habitual residence, the tax authorities will also apply a 60 percent bonus on the net income before subjecting it to tax. This means the amount subject to personal income tax is only 40 percent of the net rental income.

These bonuses may be even higher if the conditions of the new Housing Law, introduced in 2023, are met.

Declaring tax on rent from temporary contracts

You must declare the income from all the temporary contracts that occur during the same fiscal year.

Expenses can be deducted just as before, but these may be different such as cleaning services between tenants and household bills, if they’re included.

You are also taxed on your net income, however, there are no bonuses applied like with long-term contacts as it is not considered to be the tenants’ main residence.

This means you will pay tax on 100 percent of the net income and not 40 percent like above.

You will also be charged tax on any time the apartment has been empty. This amount will depend on the cadastral value of the home and the number of days there hasn’t been anyone staying in it.

Declaring tax on rental income as a non-resident

If you’re a non-resident who owns a property in Spain and rents it out, the rules on taxes will be slightly different.

As a non-resident, you must pay income tax on rent earned in Spain as well as local property taxes such as waste tax and IBI.

If you rent your property out temporarily then you will need to submit quarterly tax returns, not just annual ones. You will also be charged tax for the periods when your property was empty. 

Those from the EU will be charged 19 percent, while everyone else will be charged 24 percent.

It’s very important to remember that if you’re from a non-EU country, such as the UK, the US or Canada you will not be allowed to deduct any expenses from your rental income, therefore you will pay tax on the full gross amount you earn.

To find out more, read our guide to non-resident tax in Spain.

Conclusion

The answer as to whether temporary or long-term contracts are best for landlords will completely depend on your situation and your preferences.

Long-term contracts are easier because you won’t have so much turnover and won’t have to be as involved. There are also various bonuses and tax breaks you can benefit from.

You can earn more from temporary contracts, but this means you will also pay more in taxes too and won’t get any bonuses. It will also take up more of your time, however, it’s a good option for those who want to use their property themselves for part of the year. 

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