Many guests (and some owners!) don't realise that holiday home owners in Spain must pay income tax on their rental income. The amount depends on where the owner lives.

Contrary to popular belief, the passport held by the owner is irrelevant. It's all about where you live and pay the bulk of your taxes, commonly known as where you are a "tax resident."

Before continuing, it's important to clearly distinguish between where someone is a tax resident and what passport they hold.

You might hold an Irish passport but live full-time in the UK. In this case, you are a UK tax resident. So, as far as the EU is concerned, you are a "third country" resident.

(The EU breaks things down into three parts: The EU as a whole, the individual countries of the EU, and everyone else. Everyone else is referred to as a "Third Country".)

This is important to holiday rental owners. The amount of rental income tax you pay depends on where you are a tax resident. If you are a resident of an EU country, you pay 19% tax on your rental income. If you are a resident of a third country, you will pay 24%.

However, if you are an EU tax resident, you can deduct expenses such as cleaners, property maintenance, and so on. But if you are in a third country, you can't.

So yes, you read that right. If you are, for instance, a resident of the UK, a whopping 24% of your rental income will go to the Spanish government!

Top tip to guests: Rent your next holiday home from someone living in the EU; it'll most likely be cheaper).

How many owners declare their income? Hmm, that's an impossible question to answer. Anecdotally, it's not everyone or even the majority. But that is changing. From June this year, websites like Airbnb have to inform the authorities of every booking in every Spanish property made on their site. So even if the owners don't tell the authorities, the booking website will!

What's Changing?

Previously, owners had to declare their income and pay their taxes every quarter. This could be an expensive practice, as most will have used a professional to do the paperwork and submission, and they would usually charge around €100.

However, from the start of this year, you only need to make annual submissions. I forget the precise dates, but from memory, you must submit the previous year's income within 20 days of the new financial year starting.

So, for the 2024 financial year, which in Spain runs from Jan 1st to Dec 31st, you must submit and pay the tax due before Jan 20th 2025.

I understand you only have to submit the total income and expenditure (if applicable). You don't need to submit the dates. That said, you still have to submit the dates and guest details for every booking as they happen, but that's a different story!

This is great news, as it'll help reduce the cost of running a holiday rental home in Spain, which should be passed on to the guest.