There have been a number of tax implications following Britain’s exit from the European Union (Brexit). One of these is that UK residents who own a property in Spain will be taxed more heavily when they rent their property (24%) and they will be taxed on the gross amount, without being able to deduct a single expense. In some cases they could find themselves with more expenses than income, or the owner could be liable for paying taxes on losses due to being taxed on the gross amount.
The double tax treaty between Spain and the United Kingdom states that companies in both countries will not be treated differently. This means that if the property belongs to a company that is a national of either country and a property is rented through that company, it can deduct rental expenses.
One way around not being eligible for rental property tax deductions is for the property owners to set up a company and transfer the title of the property to the company. This way they qualify for deduction for expenses and depreciation on the rental property.
When a property is rented to tenants for use as their primary residence, it will be exempt from VAT and this tax should not be added to the income tax return.
In the case of holiday rental homes, if hotel accommodation services are provided, the applicable VAT is 10%. Hotel accommodation services include reception, change of bed linen and towels and room cleaning during the tenant’s stay. Change of bed linen and towels and room cleaning before the guest arrives or after they have left will not be considered hotel accommodation services.