Is There Vat On Rent In Spain?2023

Is There Vat On Rent In Spain?

Is There Vat On Rent In Spain
VAT on Rented Property – For VAT purposes, lessors of property are considered businessmen or professionals. The activity of leasing a property is subject to VAT, but there is an exemption in certain cases. The following are the most common:

Rental of premises: this involves the payment of 21% VAT.
Renting property to a company: this involves the payment of 21% VAT, because the lessee (the company) rents it for a business purpose and not for accomodation.
Rental property for housing: This is exempt from VAT (including garage and storage).
If the lessee uses the property or part of it for any use other than housing, VAT of 21% will be applicable. For example, an apartment which is rented as an office or if a portion is used for accommodation and another for professional office use.

Lexland Lawyers has a team of experts in this field who would be happy to advise you, ensuring that your commercial or private operations are carried out in the most tax efficient manner.

Do you pay VAT on rent in Spain?

What about IVA on rental premises? – IVA is a complicated subject and it’s always best to take professional advice to avoid expensive mistakes. If you’re renting out premises, this is what you should bear in mind:

Rental premises in Spain are subject to IVA at a flat rate of 21%. So, if the rental rate is €1,000 a month, you must charge the tenant 21% in IVA (VAT) on top (€210 in this case).
You must present your tenant with monthly invoices that include IVA.
Your tenant must pay you the amount corresponding to IVA at the same time as the rent.

Looking for professional help with taxes in Spain ? Here it is!.

Do you charge VAT on rent?

Whether you are charged VAT on rental payments depends on the particular property. If the landlord has ‘opted to tax’ for VAT purposes, then the rental payments will be subject to VAT; otherwise, rental payments are exempt from VAT. If your business is VAT-registered, your costs will not normally be any higher whether the landlord has opted to tax or not.

What is the tax on rent in Spain?

Residents in Spain – tax rates range from 19% to 47%. EEA non-residents in Spain – a flat rate of 19% is applied to your rental income. Non-EEA non-residents in Spain – if you are not an EEA citizen, you’re liable for tax at a flat rate of 24% on your rental income.

Is rent VAT exempt or no VAT?

Rents – to opt or not to opt Lettings are exempt from VAT. The landlord can however choose to tax the rents payable under the lease. This option must be made in writing, either by including a provision in the lease agreement or by issuing the tenant with a document confirming that VAT is chargeable on the rents.

In certain circumstances where the tenant has little or no VAT recoverability, it may be possible to agree with the landlord not to opt to tax the rents. This may be possible where the irrecoverable VAT lost on the rents for the tenant would be far greater than any VAT potentially clawed back from the landlord.

This will inevitably result in a higher rent, but even so, this may be less than the cost of the VAT which would have been charged on the rents. When taking out a new lease there are often other charges included in the lease outside of the main rent which need to be considered from a VAT & RCT perspective.

Insurance rent This is essentially the tenant’s contribution towards the landlords cost of insuring the property;
This is not a supply of insurance services to the tenant;
Any contribution made by the tenant towards the landlord’s cost of insuring the let premises should be treated as part of the consideration for the rent;

Consequently in relation to an opted lease, this should be taxed in the same way as the rents payable under the lease, i. if the landlord has opted to tax the rents, then the insurance rent will also be liable to VAT at the standard rate. Service Charges Service charges may include, cleaning, insurance, security, heating and maintenance, etc.

See also: Que Es Tui Spain?

Supplied by the landlord or the landlord’s own staff According to Revenue guidance, where these services are supplied using the landlords own staff, then this is a separate taxable supply, taxable at the appropriate VAT rate in the hands of the landlord.

Landlord buys in services on behalf of the tenant Alternatively, where the landlord buys in services and recharges them to tenants Revenue allow a concession whereby the VAT charged to the landlords is allowed to pass through to the tenants. The landlord should issue to each tenant, once a year, an invoice showing VAT charged to the tenant on these services.

The tenant can reclaim VAT based on this invoice. The VAT return for the landlord should be VAT neutral. Tenant covenants to carry out landlords Category ‘A’ works Where the lease agreement includes a building covenant whereby the tenant agrees to undertake any fitout works for the landlord/developer then the tenant will, in respect of its own contract with its builder be a Principal Contractor in respect of the fit out works for RCT purposes.

Section 530A(1)a of the TCA 1997, states that a person who, in respect of the whole or any part of the relevant operations to which the contract relates, is the contractor under another relevant contract, is a Principal contractor for RCT purposes. The landlord may also be obliged to operate RCT on the payment being made to the Tenant if they are themselves a principal for RCT purposes.

This common feature of leases in newly developed buildings is something which can unexpectedly catch both the landlord/developer and the tenant from an RCT perspective. The ‘own use’ exemption provided for in Section 530A(2) states that a builder or land developer is not to be treated as a principal by reason only of the fact that he or she erects a building or develops land in relation to such a building, where the building is for his or her own use or occupation or the use or occupation of his or her employees.

In this case the tenant will be a Principal contractor due to its agreement to carry out Category ‘A’ works for the landlord. Therefore the exclusion outlined will not apply in respect of the tenant’s own works, where those works are considered to be ‘construction operations’ from an RCT perspective. What is the difference between Landlord fit-out and Tenant fit-out works? Landlord fit-out – level of fit out generally completed by the developer and may include

Raised floors and suspended ceilings (with a basic finish)
Basic mechanical and electrical services
Fire detection services and smoke alarms
Air-conditioning and ventilation
Basic internal finishes

Tenant fit-out – completes the fit out of the internal space to the tenants requirements and may include

Fully-fitted kitchens and non-communal office amenities
Partitioning; including meeting rooms, offices and breakout spaces
Workstations and furniture
Re-routing air-conditioning and power points
IT installation and infrastructure
Design and brand detailing

Surrenders/break clauses When signing up to a lease, the surrender/break clauses should also be reviewed to ensure that there are no VAT liabilities unduly being imposed on the tenant. While these are only some of the areas of note in a commercial lease, we would recommend that all commercial lease agreements are reviewed from a tax perspective to ensure that there are no potential VAT/RCT issues which may arise.

Do apartments have VAT?

VAT exemption on commercial property – As a general rule, the sale or lease of a commercial property is exempt from VAT, which means neither a purchaser nor a tenant would have to pay VAT. That exemption extends to the exchange of interests in, rights over or licences to occupy commercial properties.

While that may be good news for a purchaser, it does mean that when a vendor or landlord supplies a property that is exempt from VAT, they are unable to recover any VAT incurred on related costs;
And there are certain exceptions to this rule;

VAT at the standard rate is applied to commercial property transactions where the property involved is new, i. less than 3 years old, or where the vendor or landlord has elected to charge VAT. The latter may occur where a property has been refurbished or renovated, and the vendor or landlord is looking to recover the VAT costs associated with that work.

What is VAT rent?

Option to Tax VAT – Commercial property owners can opt to charge VAT at the standard rate (currently 20%) when selling or leasing their property. When a vendor or landlord opts to tax a property, they must usually charge VAT on all supplies they make relating to that property.

Therefore, they must charge VAT on the sale or rentals. However, the landlord can also recover VAT charged to them on costs related to the property. Opting to tax can provide a real advantage in the right circumstances, for example, where substantial refurbishment costs may have been incurred.

Opting to tax is not always appropriate as some businesses are unable to recover VAT incurred on costs. These are VAT adverse businesses and include businesses in financial, insurance, health, welfare and charitable sectors. Therefore, consideration of the market sector of potential purchasers or tenants is essential before a decision is taken to opt to tax.

An option to tax must be notified to HMRC in writing. It is almost irrevocable and is only revocable in very few circumstances. Making the right long term decision is obviously critical. The option does not follow the property and the next purchaser or tenant will need to make their own option depending on their individual circumstances.

Consequently, at the time of considering the purchase or rental of a commercial property, opting to tax should be considered carefully.

Can landlords claim back VAT?

Most landlords believe they cannot claim VAT back on their properties. This post looks at what tax landlords can claim VAT back on. – By Steve Sims, tax consultant and financial journalist in For Landlords. Most landlords believe that they cannot reclaim VAT on letting business expenses because renting out homes is a VAT exempt business activity. However, this is not necessarily true. If a landlord is self-employed and registered for VAT, even if their trade or profession is completely unrelated to letting property, they may be able to reclaim the tax on some letting business costs. The solution comes down to applying European Union VAT rules and the UK definition of a letting business.

Council Directive 2006/112/EC Article 9 explains that “exploitation of tangible or intangible property for the purposes of obtaining an income therefrom on a continuing basis shall in particular be regarded as an economic activity.

” Sections 264 and 265 of The Income Tax (Trading and Other Income) Act 2005 defines a UK or overseas property business as one carried on to generate an income.

Is there VAT on ground rent?

Q I pay a maintenance charge for my retirement flat. We have been told HMRC has recently ruled 20 per cent VAT must be paid on the part-time block manager’s salary. Is this new tax due on all leasehold property owners? A Tax is payable on any “supply of goods and services” under the Value Added Tax Act 1994.

While the lease of land is treated as the “supply” of land, in most cases it is exempt from tax under section 31 of the act. This means residential leaseholders do not have to pay VAT on their ground rent.

In 1994 HMRC granted an “extra statutory concession”, which stated that the exemption applied to other charges “in the nature of rent”, such as service charges.

Why would a landlord charge VAT?

Opt to tax and commercial property – Commercial property owners have the option to charge VAT at 20% (currently the standard rate). When a landlord or vendor opts to tax property, they need to usually charge VAT on all supplies which relate to the property, therefore charging all rentals or sales.

Landlords can, however, recover VAT that has been charged in relation to the property. In the right circumstances, opting to tax can provide a real advantage, for instance, where expensive refurbishments have been required.

However, for some businesses it is not appropriate (or often, realistic) to opt to tax – many businesses simply cannot afford to recover VAT incurred on the costs. These include mainly businesses in health services and charity work. This is why it’s important to consider the market sector of potential tenants or purchasers before you make a decision.

Do you pay VAT on commercial rent?

EXPLAINED – Personal Tax in Spain for a Spanish Tax Resident

VAT exemption: What is it? – As a general rule, the sale or rental of a commercial property such as a shop, warehouse, office or restaurant is exempt from VAT, meaning neither the individual purchasing the property or the prospective tenant would have to pay VAT. The VAT exemption also applies to:

The exchange of interests
Rights over and /or licences to occupy commercial premises

Whilst this VAT exemption is beneficial for a purchaser, it also means that the vendor or landlord is unable to recover any VAT on related costs, which may be significant. There are also some exceptions to this rule, as the standard rate of VAT – currently 20% – is applied to commercial property transactions in the event that:

The property is new (anything less than three years old)
The vendor or landlord has chosen to charge VAT, for example if the property has been renovated or refurbished and they wish to recover some of the costs incurred

Do you charge VAT on commercial rent?

The exchange of interests
Rights over and /or licences to occupy commercial premises

The property is new (anything less than three years old)
The vendor or landlord has chosen to charge VAT, for example if the property has been renovated or refurbished and they wish to recover some of the costs incurred

Is there VAT on rent in UAE?

Currently, there is no VAT to pay for Residential properties in the UAE. The landlords of residential properties generally exempted from VAT payments during lease or sale of the property.

Do you pay VAT on rent Netherlands?

Is VAT charged on rent? – The lessor can ask for a guarantee from the lessee’s parent company, a bank guarantee or a rental deposit (although usually only one form of security is requested). Last modified 1 Sep 2021.

Is rent Vatable in Kenya?

Rental Income Taxation Under Annual Regime –

Rent is charged on actual amount received
Expense incurred to generate rent is allowed under section 15 of the Income Tax Act.
Tax is calculated under individual graduated scale or corporate rate of 30%
In addition, rent on non-residential buildings (Commercial) is taxable under the VAT Act(No. 35 of 2013) – Laws of Kenya.