By Welex, your efficient tax advisors in La Costa del Sol. When it comes to owning a property in Spain but not being a resident there, all expenses derived from the rental of that property are deductible when filing the tax return, as long as the non-resident belongs to the European Economic Area (EEA). Non Spanish-resident taxpayers who do not belong to the EEA will not have any deductible expenses.
Not all deductible expenses can be fully deducted, as some expenses are prorated based on the number of days the property has been rented. For example, home insurance or the corresponding rates, or the garbage collection fees.
Certain expenses, such as those for repairs and maintenance, may sometimes be confused with improvement costs. For instance, installing a new elevator is considered an improvement, whereas replacing the old one with a new one can be classified as repair and maintenance. Therefore, it is important to differentiate which can be deducted and which not.
Repair versus improvement costs in Spain
Are you willing to proceed with a refurbishment or a rehabilitation at your Spanish home that you are renting out? Are the reparation costs deductible for tax purposes at the time of declaring the rental income in Spain? Welex your multilingual tax adviser in Spain, located at the heart of the Costa del Sol, has the pleasure to provide you with some clarifications on the deductibility of costs regarding properties in Spain that are rented out.
It’s crucial to distinguish reparation and improvement costs specifically as repair and maintenance expenses are fully deductible in the year they occur, limited by the income of the rent received, while the improvement costs are non-deductible for Spanish income tax purposes when a property in Spain is rented out by a non-tax resident.
At Welex, we can confirm that recently, Spanish national administrative doctrine, and even judgments from higher courts in certain autonomous communities, assert that whenever there is a replacement of elements, it is always considered repair and maintenance, even if there is actually an improvement involved.
Other Deductible Expenses for out-rented properties in Spain
The law in Spain states that only directly related expenses to the activity can be deducted, and these expenses must have a direct and inseparable economic link with the activity carried out in Spain. It is very important to count with advisors that are updated with the recent regulations on Taxation for Non-Residential Rental Income.
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If you have any queries, contact Welex now or visit our offices, your efficient multilingual tax adviser in Spain, for any query regarding your tax liabilities in Spain being tax or non tax resident.
