March is the month when all residents of Spain, including expats living in Spain need to submit their Modelo 720. This form is how those living in Spain need to declare their assets and rights held abroad. Modelo 720 is also known as the Worldwide Asset Declaration Form. All residents in Spain who own assets in other countries of €50,000 or more in any particular category for example property need to inform the government of this in order to be correctly taxed. This means that those with foreign trust funds, savings, bank accounts, property or pension funds have to declare their assets. If you have more than €50,000 in a foreign trust fund as well as more than €50,000 invested in property abroad you have to declare in two categories. However if you have €20,000 in a foreign bank account and €50,000 in foreign property you would only have to declare in the property category. Similarly if you have €30,000 in foreign trust funds and €30,000 in foreign bank accounts you wouldn’t have to declare in either category as the criteria is €50,000 in each category not in all the categories together.
Modelo 720
The Modelo 720 was introduced in 2013 requiring all residents of Spain - expats and Spaniards to declare their assets outside of Spain. Although the law applies to all those living in Spain, residents and foreign residents alike it effects foreigners more than it does your average Spaniard. Foreign expats living in Spain tend to have assets outside the country; most of which they accumulated before even thinking of living in Spain. So intentionally or inadvertently the foreign residents are taking the brunt of this law. The original intention of this law was probably to prevent Spaniards from moving assets abroad to avoid paying Spanish taxes. The law was also intended to prevent money laundering and tax evasion. Retired Europeans living in Spain just happen to be the group which is more likely to have assets abroad.
Asset holders who fail to submit the form; fill it in incorrectly; lie on the form or file late face heavy fines. Fines start at €10,000 and can reach 150% of your foreign assets. It is advisable to consult with a tax lawyer before submitting your Modelo 720 which must reach the government offices by the last day in March.
Spain is now the most popular European destination for vacation rental properties. Three years ago the Spanish government excluded vacation rentals from the Ley Arrendamientos Urbano (LAU) and regulating the rental industry became the job of regional governments. Out of Spain’s 17 regional government authorities only 11 have to date published any laws regulating the vacation rental industry. Each region has its own set of laws for vacation rentals and the laws are not standardized throughout the country. This means that vacationers who have stayed in a holiday rental in one area of Spain can not presume that the regulations will be the same if they then stay in a different region.
Spanish Regions with Unregulated Holiday Rentals
The holiday rental property industry is not regulated in Andalusia (due to be implemented in 2016); Castile-la Macha; Castile & Leon; Extremadura; La Rioja and Region of Murcia. In these unregulated regions property owners can still rent out their property for short-term accommodation under the original national LAU so long as the region has not introduced any policy outlawing holiday rentals. In this case a legal contract between the landlord and the tenant still needs to be drawn up. If it is illegal to rent in the region then the landlord cannot advertise the property as a vacation rental in any way or form – not in print or online.
Read more about Spanish regions where holiday rentals are regulated...
Spanish Regions with Regulated Holiday Rentals
In Aragon the vacation rental industry is regulated under the Decreto 80/15. Landlords can rent to tourists for a maximum stay of 1 month and single room occupancy is not permitted. In Asturuas the vacation rental industry is regulated under Decreto/34 2003. For properties in rural areas your property must be available in July, August and September in order for you to be able to rent it out in other months of the year. In the Balearic Islands the holiday rental industry is regulated under the Decreto 20/2015 (amended version); landlords are allowed to rent to a maximum of 12 guests/6 bedrooms. Holiday rentals have been regulated in Basque Country – Pais Vasco since 2013 under the Decreto 198/2013. Single-room occupancy is permitted for a maximum of 12 guests/6 bedrooms. In the Canary Islands holiday rentals have been regulated since May this year under the Decreto 113/2015. Guest details must be registered with the police and single-room occupancy is not permitted. In Cantabria the vacation rental industry is regulated under the Decreto 19/2014 but no single room occupancy is permitted and owners should have public liability insurance. In Galicia rental properties are regulated according to Decreto 52/2011. Single family homes can get licensed but apartments are not regulated. In Navarre tourist rental properties have been regulated since 2011 by Decreto Foral 230/2011 properties must be registered according to whether they it is built in the traditional style or whether it is a modern construction. In Valencia rental properties are regulated under the original Decreto 92/2009 which was updated in 2015. It is now compulsory to register holiday rental and if you have more than 5 holiday rental properties you must register as a tourist company.
Tourist Rental Properties in Madrid
In Madrid rental properties are regulated according to the Decreto 79/2014 and properties can offer a minimum stay of 5 days to tourists. This ruling has prevented many landlords from renting to tourists who usually want to stay for a shorter period. Single room occupancy is not allowed in Madrid and properties have to provide free WiFi. These rulings together with the fact that landlords applying for a holiday rental license have to present a floor plan stamped by an architect or surveyor make it very difficult for private property owners in Madrid to become holiday rental landlords.
Barcelona Holliday Rental Industry Regulation
In Catalonia the vacation rental industry is regulated and has been since November 2012 under the Decreto 159/2012. Despite this law holiday rental licenses have not been issued in the capital since May 2014. Licensed holiday rental landlords must photocopy the guest’s passports and take all guest details to log with the police. When advertizing the rental landlord must display his H.U.T. number. In addition Barcelona tourist rental properties must have a First License of Occupation. Landlords can register for free but the individual councils (ayuntamientos) may charge a fee for handling the registration. In addition the property owners must pay approximately €145 to have the rental property quality graded. Although there is a freeze on tourist rental licenses if you purchase a property in Barcelona which already has a tourist rental license the license averts to the new owner who can then rent out the property.
The number of visiting foreigners to Spain is on the rising and in the summer of 2015 the number of vacationers in Spain was the highest in many years. Holidaymakers are increasingly choosing to stay in holiday rentals rather than hotels for a number of reasons. When you stay in a Barcelona holiday rental property you can save money on your food by preparing your own meals; you are not limited by the number of people you bring to the property and you have the creature comforts of a home.
A New Law Protects Illegally Built Homes from Demolition
Seven years ago the Prior family from the UK had their Spanish home demolished due to planning irregularities. Since then they have been waiting for compensation and battling it out in the courts. This week they had a major victory, not for themselves but for any future foreign home owners in Spain who fall foul to bad property planning in Spain. The pensioners, Helen and Len Prior were present to witness the Spanish Senate’s vote introducing new legislation preventing house demolitions until the home owners have received compensation in full.
The story of the Prior family began when their villa (valued at €350,000) was demolished after their planning license was revoked. From the moment the regional government revoked their planning license the house became illegal and subject to demolition together with other properties on the same development in Vera, Almeria. The Priors had joined forces with other foreign homeowners in Spain to push through the new regulations. The first victory was in March when the law was changed making it illegal to demolish a home built contrary to regulations by unscrupulous developers until the homeowners have been compensated. This week the legislation was extended to include homeowners whose homes were also under threat but due to administrative errors in the planning permission rather than errors by the rogue developer.
In the future homeowners will be protected from home demolition if they are living in a house built illegally by a developer as well as if they are the victims of an administrative error in the licensing process. Before demolition or any legal proceedings it will now be required that responsibility for the error is determined and that the property owners are compensated for the purchase they made in good faith. At the moment the law is not retrospective so unfortunately the Prior family will have to continue their private battle in court to gain compensation for their financial loss.
