Guest author: Thomas Fitzner
He thought that he had done everything right, but the owner of a holiday home was still unpleasantly surprised when advised by the tax authorities that he owed turnover tax (Spanish:IVA) – out of the blue.
The person concerned is puzzled as he does not operate a purely commercial holiday-home rental which would be liable to VAT, only the administratively and fiscally- simplified version for which no IVA accounting is necessary.
Reverse-charge procedure
How can someone owe VAT who carries out no VAT-liable activity? That is simple in the case of holiday renting: responsible are invoices for agency services from foreign companies with reverse-VAT (‘reverse charge’). In order to understand this one must keep in mind the difference between cashflow and ‘fiscal reality’. Although the payment goes direct from the end customer to the intermediary, and then is passed on to the owner, the problem is that it deviates from the cashflow principle – on the one hand the customer pays the rent to the owner, and on the other hand the owner pays a commission to the intermediary.
Tax liability of the owner
The rent is, in the aforementioned situation, turnover-tax free. The commission paid is, however, neither turnover-tax free nor liable to reduced turnover-tax but must be calculated with the existing 21% IVA (impuesto sobre el valor anadido), regardless of whether the property owner rents with or without VAT.
If the foreign intermediary then raises an invoice using VAT reversal a liability for the owner is the result. Then for a service provided in combination with a Spanish property the turnover tax is definitely due in Spain if the owner has a Spanish invoice address. (In the case of a German invoice address there is a situation requiring clarification, which we will examine at the earliest opportunity).
The property as a business
The property owner has, according to the Spanish fiscal law, a business – no matter whether he is registered for turnover tax or not even when, in terms of income tax, he does not count as a business owner. Hence even an owner renting without VAT can receive an invoice with VAT reversal. On it a net sum is noted together with an endorsement in the sense of: The turnover tax must be paid by the invoiced party. This clearly means that the property owner now has to pay 21% on the invoiced amount to the Spanish tax authorities.
For such cases – turnover-tax payments from businesses which are not entitled to deduct VAT – there is a form. The Spanish tax authorities have issued a directive that unpaid turnover-tax should be paid by the property owner. It would be recommended that the situation be examined should there be any doubt.
Complimentary seminar for holiday rentals
A seminar on the subject ”Holiday renting in Mallorca: risks and solutions” will take place on the 2nd February 2018 in Palma de Mallorca. Participation free. Further information: http://www.europeanaccounting.net/veranstaltungen/
