Holiday renting in Mallorca is popular and lucrative. Since 2017, however, the requirements for the issue of a renting licence have made renting much more difficult.
2017 was a turbulent year for holiday rentals in Mallorca. The Balearic government initiated a new law on the 1st. of August imposing a moratorium which means that it is likely that, at least before summer 2018,no new applications for holiday rental licences will be accepted.
This period is intended to give the town of Palma, and the island council in collaboration with the municipal councils, time to establish regional zones for which licences will be considered after the end of the moratorium. The holiday letting of properties, when all requirements are met, will only be allowed in these zones. Apart from that Internet portals and agencies will be required to publish the licence number of the holiday home in their offers. Otherwise not only the owner, but also the website operator are threatened with high penalties.
Thomas Fitzner of the law firm European@ccounting and his team specialize in tax and legal issues of foreign owners of Spanish properties, particularly regarding holiday rentals. We asked him about the current situation:
Mr. Fitzner, if the owner of a property has already applied for a licence for holiday letting, but has not yet been granted it, can he still let to holiday guests?
If the owner meets all legal requirements he can continue to rent. He should, however, definitely check which new or amended requirements are valid immediately or may become valid after a specific transitional period.
Thomas Fitzner of the law firm European@ccounting.
Is there a danger that licences already granted could be withdrawn?
Only if the requirements are not met – see above.
How do I get the registration number which must be shown in the internet portal?
When a holiday rental property is registered with the Ministry for Tourism a registration number is issued as a substitute until the licence is finally issued. After recept of this number the property can be immediately let regardless of how long the authorities need to examine the data given by the applicant and issue the final licence.
Are these licences for specific individuals or can they be sold together with the property?
The registration number and later the licence always relate specifically to the property.
Are there exceptional rules for the letting of apartments?
Apart from the general rules there are a number of additional conditions which apply to the letting of apartments. These are essentially to protect neighbours from harassment.
May a tenant sub-let a property to holiday guests in his absence?
Only with the knowledge and express permission of the owner, and only if all legal requirements are met. It should be considered that the owner may be subject to tax risks as subletting would mean that the main rent is subject to turnover tax.
Must the complete property be let or can separate living units or ‘casitas’ also be rented to holiday guests?
Fundamentally a property may only be let to one entity, as otherwise it would be considered to be a ‘hotel-like’ contract which would be subject to other laws. The only exception – the new laws allow letting by room when the property is the principle residence of the owner and he also lives there. This modality, however, is only allowed for a maximum of 60 days per year.
What about seasonal renting, that is, the letting of the living space for a specific time without any additional services such as bed linen or cleaning? Is this still allowed?
This is referred to as VAT-free holiday renting, as long as the marketing is carried out by agencies such as Porta Holidays. All rentals for periods of less than a month are automatically seen as holiday rentals by the authorities, meaning that a rent licence is required unless it can be proved that it is a purely residential rental, which could also happen at short notice. Important: The new laws reverse the burden of proof – to date the authorities were obliged to prove that the rental was a holiday letting, but now the onus is on the owner to prove that bit is not.
Private owners with residence in Germany and a property in Mallorca are subject to turnover tax (IVA) currently at a rate of 21%. Can this be taken into consideration in the German tax returns?
For VAT-free holiday rentals the VAT in Spain and Germany is counted as additional costs. In the case of holiday letting subject to VAT the tax is not considered in Germany and remains a subject for the Spanish tax authorities.
Must the owner declare the VAT or is this done by the agency, should one be involved?
If the agency is located outside Spain and is not registered in Spain the reverse-charge procedure applies. This means that the owner receives an invoice for agency commission without VAT and must pay the 21% IVA to the Spanish fiscal authorities.
Keyword agencies. Mr. Fitzner, does it make a difference to owners whether the agency, like the property, is registered in Spain or Germany?
There are, of course, differences because the turnover tax in Germany is 19% and in Spain 21%. The only really problematical constellation is: German agency, owner with a German adress in the agency contract, and the property in Spain. If the agency gives no Spanish adress and has no Spanish VAT number, there is a danger that the turnover tax will have to be paid twice. The reason is that the Spanish and the German tax authorities interpret the EU turnover tax directives differently. The result is that, with the aforementioned combination both authorities believe that turnover tax on agency services is liable in their country. An absurd situation which should never arise in the EU. We have communicated intensively with both countries in order to clarify this but unfortunately could not solve the problem. As there is no double-tax agreement for turnover tax, a real double-taxation situation could arise without the possibility of a credit. There is, however, a solution which we are already applying for our clients.
What do you recommend to a German owner intending to purchase a property in Mallorca with the intention of holiday renting?
The most important advice: Be fully informed BEFORE you start and maybe acquire a property. As an example and to illustrate the difference competent and multidisciplinary advice at the right time can make – recently I had a telephone call from a client who had initiated the construction of a house in Mallorca with the intention of holiday renting. His questions were actually about the return of turnover tax, ie. concerned with only the tax situation. It then turned out that he had no knowledge of an important provision in the new tourist laws which states that holiday renting is only allowed with properties which are at least 5 years old. With that, the turnover tax question no longer existed. The degree of sensitivity of this subject shows itself only to those with knowledge of both the tourist laws and the turnover tax laws.
Herr Fitzner, thank you for the interview!
Do you have direct questions for Mr. Fitzner? You can contact him through theoffice of European@cccounting or by email at: thomas@europeanaccounting.net
