Illegal letting situation in a nutshell

Illegal letting situation in a nutshell

I’ve just had to close the Update on Illegal Letting Situation post to comments because it reached 150 replies, and that affects formatting. I was just posting a comment to that effect when it occurred to me that there was something new that I could post that would reopen the issue, and therefore the ability for comments.

It is that this week, Tenerife Weekly published an article they’d asked me to write on the matter when I posted about the Supreme Court judgment and the new inspections tactics, and I must say that the writing of it was itself a useful exercise in compressing the information down to editorial size! So, HERE is a link to the article. It opens up a click to read issue of Tenerife Weekly, and the article is headlined on the front page, with the text just inside the front cover.

And now, having said that, the comments can start again!

54 Comments

  1. Hello Janet
    I have been asked by one of my neighbours (tourist complex), when will the new tourist law be agreed and adopted, I said perhaps May or June, is that still the current timetable?

  2. Author

    Yes, pretty much. It could be as soon as the end of this month, but I’d be surprised now. Needless to say, I’ll post the minute I have anything to report, but if you work on that assumption you won’t be far wrong.

  3. Hello Janet
    I have just read your today’s comments on the tourist rental restrictions, that may be also applied to mainland Spain. I suppose a country that is in a economically healthy state can afford to take these risks and gamble a bit with their economy. However Spain is not in a a good economic position, so it is just plain crazy to impose tourist restrictions that will further damage the remains of their economy.

  4. Author

    well, yet again Ken, it seems that our assessment is not shared by the Government. One has to presume (and one hopes it’s true!) that a Government will have policy and economic advisers to hand. One thing is clear, I am not an economist nor a tourism policy adviser. To some extent, they would be entitled to say (as I think to myself) … who are you to say we’re wrong …

  5. First of all, many thanks for making such a wealth of information available to all – and my apologies if I’m heading somewhat off the topic of Illegal Rental.

    I’m looking at Tenerife as a possible place to have a home, initially for holidays and subsequently for retirement. It will be modest, probably a 2-bed apartment in “real” Tenerife, ie not in a complex.

    However, my reading indicates that although I won’t be renting it out, I will be liable to pay tax on that non-existent “rental income” while I am resident elsewhere in the EU. Furthermore, it also appears that I will be taxed on my overseas assets if I become a resident in Tenerife, even though those assets will actually be an apartment worth around €100,000 euros which is in another country and will likewise not be rented out, and around a further €100,000 in a UK bank attracting negligible, if any, interest. I’m unclear about the level of this prospective tax and taken aback at the very notion of it.

    Have I got this right? If so, I think I can see why Spain is in such a mess these days…

  6. Author

    well firstly, this is about Spain trying to enforce rules that foreigners here have routinely ignored, something that has cost the country a lot in lost taxes and the like. Yes, assets of over 50,000 outside of Spain must be declared by those who are resident within Spain. It’s essentially the application of the existing (and to the Spanish themselves too) rule about resident declaration of worldwide assets. Please have a read HERE for links to complete expert information. Please note, though, that when Spain says “abroad” it means outside Spain. If you’re resident in Spain and your apartment is in Spain, it doesn’t count as a “foreign asset” for the purposes of this declaration.
    .
    Moreover, because Spain has been “done over” for a very long time by foreigners who don’t declare rental income, there is a small tax to pay on the basis that there will also be something coming in. It’s not unreasonable for Spain to say that if an owner is not resident in the country, it is likely that there is at least some rental income (and that’s the assumption of legal rental income … ). It’s certainly less unreasonable than assuming all foreign owners are law abiding and honest and who don’t need any encouragement to pay taxes. Please have a read HERE where I outline all the expenses you’ll incur as a property owner.

  7. Dear Janet,

    I along with many who have invested millions of pounds & euros would take exception to the phrase “done over” in your post, I have had an
    email today from an owner who was sold a property from a leading estate agent who just happens to be a member of Alcota, they have it in writing that they wished to purchase this property to rent & were assured it was legal, it is NOT.

    I my self have had legal people in Tenerife who have done my tax obligations here for over 10 years & not once did they inform me that any taxable income from renting should be paid here & not in the UK where the income was generated, even my own company account thought this was a reciprocal agreement between Spain & the UK.

    This special status the EU has given the Canaries seems just a way of changing the rules when ever they like and it is they that are the ones “DOING OVER PEOPLE”

  8. Author

    Hi, M, and I didn’t at all mean to imply a generality … there are plenty who have avoided tax, but plenty too who have been completely law abiding, and I wouldn’t belittle that in the slightest. Sorry to cause offence, I was rather trying to explain the Spanish mindset, hence the quotes marks.

  9. IDBI, there is an agreement between (the whole of) Spain and the UK that tax on income generated in the UK from Spanish property should be paid in Spain and not UK but, as you imply, lots of people don’t realise this and pay the tax in the UK. These people believe they are law abiding even if they have got it wrong. The double taxation agreement means they don’t have to pay it in the UK as well.
    .
    Interestingly though, there is no double taxation agreement on the Spanish tax that has to be paid for the periods when the property is not let because there is no UK equivalent.

  10. Janet & IP,

    Surely what the government are doing is illegal, assuming we are renting & then taxing people who are not is tantamount to theft.

    Perhaps the lawyers fighting our our cases in the courts should look into to this practice as it appears they have been doing this before they changed the law on renting in 1995.

    I know they have special rights under the EU but they have already lost cases in the European Courts over tax differences between Residents & Non Residents, in fact there are Millions of Euros in Spanish banks still waiting to be claimed by investors for these miss deeds by the Government.

  11. Author

    This is a long established tax, M, and nothing to do with Turismo or its policy. It is a completely separate matter, concerned with the Hacienda. Sorry but it can’t be conjoined onto this issue.

  12. Is anybody familiar with this new legislation going through Madrid? My Spanish is not good enough to understand it, but it alludes to a national ban or at least restriction on holiday lets.

    Link

  13. I’ve always assumed, but with no particular reason to do so, that the tax on deemed rental income also applies to the 2nd homes of Spanish residents as well as non-residents. Maybe somebody can say for sure.

  14. Adam, Janet has a later post about this.

  15. Author

    Thanks IP, it’s HERE Adam.
    .
    edit: yes, that’s my understanding too, that the notional income tax applies to anyone non-resident here, including Spanish nationals. I’m not an accountant though.

  16. OK you dont want to mix the issues but the Government are still accusing people of breaking the law without proof and profiteering by their actions.

    Also is it not the Government that issued the fines not the Tourist board.

  17. Author

    It’s all the “government”, M. But in the UK, think of the difference between the Treasury department and the Welsh office. The “tourist board” is the Department of Tourism, Turismo. A government department, but entirely separate to the tax department.

  18. My only advice to IDBI is that looking for any morality or logic in the way national and local governments extract money from individuals is a complete and utter waste of time. I am just grateful that the amounts extracted in Tenerife are very modest compared with the UK!

  19. Grumpy,

    At least in the UK I am not automatically preceded to have broken the law and when many people have not & they are then taxed for not doing so. If you had been sent a speeding fine because because the police THOUGHT you were speeding but without any proof I wonder what your attitude would be then!!!
    Smacks of a 3rd world country or even a police state ( god help us )

  20. IDBI (forgive the abbreviation but I’m an old man and a lousy typist).
    It is not a presumption of law breaking, just an excuse to take money off you. In the UK, if your employer realises you need a car to do your job, you will be taxed on the list price of the car when new. If your employer sources a two year old car at half the list price, you will still be taxed on the new price. How fair is that? Years ago, a government decided that, if you bought a cooker, that was a necessity and VAT was charged at 10%. If, however, you had bought a fridge (so that the food you were going to cook in your new cooker wouldn’t go bad) it deemed you had bought a “luxury” and had to pay 25% VAT. I could, and frequently do, go on. but I’ll keep the rant short!

  21. Grumpy,

    You miss the point all that you have listed you are getting something does not matter what the tax band is. What the Government in Tenerife are doing is assuming you got something even if you did not but they are still going to tax you anyway at 24.75%

  22. IDBI, Spain simply wants to tax 2nd home owners and that’s just the way that it decides to calculate the tax. Just think of it as a tax on 2nd homes and ignore the reasoning and you might feel a lot better!

  23. Author

    Yes, and the French do the same. Here, it is roughly 0.25%. I understand that it is 35% in France (that’s thirty-five, not a misplaced dot!) … they call it a “social tax”.

  24. Hi Janet
    What is your response to the latest article in “Island Connections” by John Hatrick of Tenerife Solicitors which seems to refute almost all the considered wisdom expressed in these pages. Not only do they explain that the new law due end April will have to comply with the Bolkenstein directive, but they expressly state that their
    analysis of the (exisiting) legal situation is that

    “any owner or agent wishing to rent their property on a tourist complex is not legally obliged to use the sole expoloiation agent nor to obtain any specific tourist licence…and may now proceed to rent their property privately or through and independent agent”

    That seems to be pretty clear doesn’t it?

  25. Author

    Alotca lawyers José Escobedo and Santiago Saenz are drawing up into a written piece their own interpretation of the judgments and Bolkestein generally, and I hope to have it to publish in the near future. They say that their interpretation, which I’m afraid is very different, is informed by EU and government lawyers and independent researchers here.

  26. Janet/IP,

    Why are you always defensive to what we say about this situation one minute we are being told not use Portugal as an example yet then we are informed about what France do.

    If the Government want to charge a second home tax why dont they do it instead of hiding behind some crap excuse.

    I will tell you why when they find out how much income they are going to loose because of their actions, they will have a chance to bring in a tax for second homes, but they will not cancel this tax

  27. Author

    This is my home, and I find it offensive that some (not you!) “instruct” Spain in their “folly”, and tell them that there are better models “out there”. It is as though they believe that Spain hasn’t a brain cell, doesn’t use advisers, doesn’t have (or isn’t entitled to) its own opinion on how best to conduct its own policy.
    .
    I find it offensive too that those who most shout about this have chosen to be here. No-one forced them. Where I have most sympathy is in situations like yours where buyers were either misled or not informed of what they were buying into. But when people know the system, buy, get into trouble, and then complain about Spain’s “tyranny”, I’m afraid that I think Spain deserves a bit of defence from such hypocritical arrogance.
    .
    As far as France is concerned, it was merely an example that the second property tax is a fraction in Spain of what it is elsewhere … again a defence of so-called “thieving Spanish bureaucrats” …
    .
    Don’t get me wrong – I don’t have rose-tinted glasses. There is a lot wrong with this country. That is true of everywhere, however, it’s just a matter of degrees and priorities. I personally think Spain’s tourism policy is wrong-headed. I am a member of an association that is trying to persuade one part of Spain to rethink. I would never question their right to set their own laws, though!

  28. Of course there needs to be regulation and legislation, I’m sure no-one would question that. But because they have not done any research into the tourist market (which has changed a lot since 1995) they seem to be going down a road which effectively prevents independent travellers from visiting the islands at all – unless they want to stay in a hotel or tourist apartment complex. Many such independent travellers do not want to stay in either of these – that is the whole point. I think there could have been more of a middle way based on up to date research on the requirements of ALL key tourist groups, not just the aspirational 5 star segment. Though hopefully they will address some of the villa issues in the legislation. I just hope they don’t preclude those front line villas from getting a tourist licence, now that would be ridiculous!

  29. Author

    Petra, I’m sorry but I must disagree … they have done a lot of research! They might have drawn conclusions that we disagree with (and I certainly do!), but let’s not assume they’re acting in entire ignorance.

  30. IDBI. You must have missed my first sentence “It is not a presumption of law breaking, just an excuse to take money off you”
    All taxation is the same. It is the extraction of money from individuals and corporations for spending by government, and any excuse will do, however irrational. I am just grateful that the level of expropriation in the case of Tenerife is so modest. In Arona where I have a property on a strictly residential complex, I pay rates of 400€ a year and basura fees of 110€. In addition, as a non resident, I have to pay 170€ tax on notional rental income, making a total of a little under 700€ a year. In Nottingham, where I live, the Council Tax for an equivalent property, whether I occupy it or not, is £2,000, say 2,400€. I therefore see no reason to complain about Tenerife’s tax on my notional rental income, however spurious the justification. It is how much I have to pay that concerns me, not the weasel words used to dress it up.

  31. What a shame this action has caused so much animosity and mistrust in such a beautiful country, my wife and I had considered retiring here and like you Janet buying somewhere idyllic to pass our years and to invest even more money.

    But you need to trust people in Government ( and I know that is a little naive ) but what they have done to us is I am afraid unforgivable, over the years we have had holidays in our property with friends and family and made friends with local workers and businessmen who I know are now struggling by these actions.

    My property is now for sale and I will sell it to get out of this can of worms I will be very sad but you can only take so much which I feel a lot of owners feel the same

  32. Grumpy,

    I do not know what size shed you live in Arona but I have a 2bed 2bath
    Apartment on a Residential complex in Peurto Saintiago my community fees which do include basura are €3170.00 a year.

    My property in the Uk has 4 large double bedrooms 2 of them en suite
    A very large breakfast diner and a very large lounge I am 5 minutes walk from town and my property over looks a lake for this I pay €2760.00 yes that is Euros, so d’ont preach to me value for money.

  33. IDBI – you’re not comparing Like with Like – your community fees will include maintenance, complex cleaning, general insurance, probably a swimming pool ??

  34. Thank you Doreen.
    IDBI, I too have a 2 bed 2 bath apartment and I too pay community fees as well as taxes BUT, as Doreen rightly points out THAT ISN’T TAX, IT’S THE COST OF MAINTAINING THE COMMON AREAS.

  35. That doesn’t seem to a view shared by Roman Rodriguez of NC and the University of Laguna who conducted a detail review of the legislation and both publicly criticised the total lack of research into current tourist markets in the Canaries. The draft legislation is deeply flawed.

  36. Doreen/Grumpy

    Neither are you comparing like with like the areas in comparison are like London to Newcastle (No offence intended my family come from County Durham) the infrastructure and cost in the Tenerife is like a p1ss in the pond compared to the UK.

  37. I stand corrected. Council Tax in Newcastle is only £1,800 ie £200 a year cheaper than Nottingham. So what is your point exactly?

  38. Taxation is a man made curse, however it can be used for the benefit of many, but we should not confuse it with the issue of mis-selling apartments for rental and then later the enforcement of the 1995 tourist laws, where the only beneficiary appears to be the “Sole Agent”

  39. Grumpy

    If you dont get the point why should I waste my time trying to explain it to you again

  40. ***waves***

    Hi don’t mind me just passing through!

  41. I am thinking my council tax in Buxton of £1,350 and IBI/Basura in Fuerte of 230 euros is a bargain, just not sure how it relates to illegal letting.

  42. Hello Petra, yes lets try and focus on the real issues, the unjust enforcement of the 1995 tourist laws on the innocent victims. The victims are the unsuspecting investors who may not have been advised that it was shrouded with some difficulty. The investors innocently purchased apartments with the purpose of providing an independent niche rental experience for the more desiring tourist.

  43. Honestly,

    All I was doing was answering Grumpys original post it was he that said it was cheaper in Tenerife than the UK and I said you can not compare them as the same. if you are in Nottingham, Buxton or London there rates are different for the same reason “expenditure”!!! Taxes
    I am now going for a lie down.

  44. After all the comment following the news that three court cases were thrown out, has nobody come to the same conclusion that the canarian government is the one that is acting illegally ? That the reason the cases were dismissed were because of bolkestein (2006/123/EC) surely means that the whole of the EU law stands ? Just read the EU law. There appears to be nothing in the 1995 Canarian law which is allowed under the higher authority. I would be very surprised if the canarian authorities even go through with the court cases once they realise what they should have done since the inception of the 2006 law. I would have never have thought I would hear myself say ” thank god for the EU ” !!!!!!

  45. Author

    I appreciate that those who have vested interests, like owning apartments they want to let freely, or having individual holiday letting websites, will interpret these judgments as they prefer, but as I said above, “Alotca lawyers José Escobedo and Santiago Saenz are drawing up into a written piece their own interpretation of the judgments and Bolkestein generally, and I hope to have it to publish in the near future. They say that their interpretation, which I’m afraid is very different, is informed by EU and government lawyers and independent researchers here.”

  46. Please do not get your hopes up regarding these cases. The 1995 Act was in fact amended in line with the Bolkestein Directive where necessary in a 2009 Act and these cases recognise that and do not seem to quibble with what was left unamended: the cases dealing with property relate to fines imposed pre the 2009 Act and appear to have no relevance whatsoever with regard to individual owners fined in the last two years.

  47. And if this 2006 EU directive is so all powerful & pervasive, how come you still cannot do rentals under 3 months in Westminster and 5 other London Boroughs: the fines in Westminster are 25,000 sterling !

  48. Author

    Link to the 2009 Act is HERE (is in the Links page too)

  49. We have a holiday let in Westminster we got planning permisson from the council who were only to helpful we were inspected by a really nice woman who submitted the paper work and have never looked back.
    I no longer understand the agenda of this website, the whole tone of your comments have changed I thought the idea was to try to change the law.You seem to think the Spanish do not need to change the law as they have got it right, so why bother with the website why waste your time.
    We should have invested ouer time with someone who did feel strongly that law for ” All ” our islands and our businesses should be change.

  50. Author

    No, phillipa. I have repeatedly said that I think the tourism legislation is wrongheaded. I just consider the Spanish have the right to legislate as they see fit. We have lobbied to get them to reconsider, and continue to do so, but they have an overarching vision for tourism that is unshiftable. We have to work within the reality of the situation, however much we might disagree with it.
    .
    If this website, which is a personal blog after all, has an “agenda”, it is “information, news and advice” about Tenerife. This is one aspect of it. It is not a single issue website. Far from it. As I’ve said before, Alotca’s purpose has always been clear, and those who disagree with it and want to bash their head against a wall and argue the odds with the government about a free for all, or any other matter on which it will not budge, are welcome to go and form their own association for the purpose.

  51. I think the idea of a controlled market would be good for tourism in general, it would weed out the owners who don’t care too much about the presentation of their accommodation rentals, or safety issues.
    If you commission the services of a registered licensed tourist agent then they are able to let your property legally, attend to the payment of taxes due and handle all the housekeeping and maintenance issues.
    I have experienced staying in a holiday let, advertised as a quality holiday bungalow, only to find the estate run down, the furnishings shabby, and far from my usual standard of cleanliness.
    A pool that was empty, because many owners had failed to pay the complex maintenance fees, a far cry from the glossy pictures and promises made.
    Holiday lets should be seen as a business, professionally presented, taxes paid in that country for use of what is a stunning holiday destination experience, and not something downmarket.

  52. Phillipa, I was basing my comments on the block I lived in in Westminster – clear signs forbidding short term rentals. I did not realise it was not a total ban and you could apply for planning permission. You will see they are very strict in their controls. The EU directive will not overturn their decisions.
    .
    http://transact.westminster.gov.uk/docstores/publications_store/Short_Term_Letting_Guide_2008.pdf
    .
    The planning in the Canaries separates into Residential & Tourisitc. Yes, it is to be wished that Turismo had been as strict (and open) as councils such as Westminster but this issue was always known about by many professionals in the Canaries who sadly often saw a sale as more important than fully informing clients as to possible consequences.

  53. If you go to CW’s web page, under legal matters it contains the 2 links below written by Mariano E Zunino Siri who is a Spanish lawyer and is explaining his view on the current legal position.

    1) http://www.canarianweekly.com/tourism-law-fines-letting-apartments

    2) http://www.canarianweekly.com/repercussions-tourism-law

    He explains that there are 2 laws covering Short Term Lettings – a national one which covers normal lets and an autonomous one which only applies in the Canaries. Under the national law you can let your property how you want provided you are not indulging in a touristic activity as that would breache the Autonomous law.

  54. Author

    As he says:
    .

    In other words, the Autonomic Community cannot stop you renting the apartment (because it is your civil right) but instead, can fine you because you’re in breach of the Administrative Law.

    .
    Which is what we’ve been saying since Dec 2010 – you can short-term rent an apartment for a day to a year on a temporada contract under urban letting law, but Turismo will deem anything under 3 months to be a commercial tourist let.

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