Here, the difference between VAT-liable and VAT-exempt holiday rentals must be noted.
Holiday Rentals with VAT Liability:
VAT-liable holiday rentals constitute a commercial activity if services are offered to guests that are typical in the hospitality industry. These include reception services, ongoing support, regular cleaning, linen changes, luggage storage, catering, etc. The income is subject to VAT (IVA) of 10%, which is paid quarterly to the tax authorities after deducting input tax (“Modelo 303”). An annual VAT return (“Modelo 390”) is also required. From a Spanish perspective, this type of rental establishes a permanent establishment, so profit determination follows the rules of the Corporate Income Tax Law, with three interim payments and final taxation via the corporate tax form (“Modelo 200”), in the same way and under the same rules as a Spanish company. A 25% corporate tax is due on the profit.
Holiday Rentals without VAT Liability:
Without VAT-liable services, the rental is considered residential leasing for tax purposes, even though holiday rentals may be differently defined under the civil tourism law of the respective region. However, invoices from intermediary agencies may result in an obligation to pay VAT The Non-Resident Income Tax Return (Modelo 210) must be submitted between January 1st and 20th of the following year (by January 15th if payment is to be made by direct debit). The tax is 19% on the profit for EU citizens, with certain restrictions on deductible expenses and depreciation. For periods when the property was not rented out, self-use tax is due, which must be declared separately.
To ensure that you are well-informed when purchasing your holiday property in Mallorca, it is crucial to seek advice from local experts who specialize in all relevant areas. In this context, we recommend the advisory services of PlattesGroup, who work closely with the financial experts at Lionsgate Capital. They assist their clients in optimizing investments in Spain, thanks to their extensive experience and services in the Balearic Islands and across the country.
