Spanish taxman goes after undeclared property rental income

Property owners who let out have something else to worry about now apart from a possible fine from Turismo for those who are letting illegally. With the start of the 2015 tax return period, the Agencia Tributaria is carrying out a particular campaign targeting those who fail to declare their rental income. The campaign at least in part involves finding adverts placed on the internet, and then assessing and comparing the property with other factors to determine if it is actually occupied more than claimed. Agencia Tributaria chief Rufino de la Rosa will not go into detail about how the tax authorities are going to tie all the information up, but says that around half of all rentals in Spain are undeclared for tax purposes, and that this is fraud, a very serious legal offence.


  1. Do you have the contact email or telephone number for the department who are dealing with fraudulent rentals.
    We now of a property who rent out there villa as a hotel and are causing problems with parking noice pollution and building an extention without approval.

    1. Author

      do you mean the tax authorities or Turismo? If Turismo, the details are on the FAQ page for Illegal Letting, but if you mean the Hacienda, then I’m afraid I don’t have those details.

  2. Can anyone explain to me how it is possible to be taxed for an activity that if you actually carried it out would be illegal, and subject you to an €18,000 fine?

    I have looked at buying a property for myself, not to be rented, on a solely residential community. This is for holidays until I retire, then to live in permenantly.

    The hacienda will want to charge me a tax amount on the “notional rental” of the property, even though no rental income is being received. However if I did rent the property out, I would be liable for a huge fine for “illegal renting”.

    Where is the sense? ……..anyone?

    1. Author

      The tax is on rental income, not illegal holiday letting income! The tax authorities are after tax unpaid on long-term rental income from second properties. This is far and away the main source, it seems, of undeclared property income.

      As to the notional rental income, they make the not entirely unreasonable assumption that if a property is owned by foreigners who do not live in it, there might well be some rental income. It is not discriminatory because it is applied to anyone who is non-resident, including Spanish nationals who live on the mainland.

      In the residential property case you describe, you would be entirely at liberty to rent out for between three months and a year on a short-term specific-purpose contract, or on a more permanent basis on a long-term residential contract. Your question assumes that the only sort of rental here is holiday lets, and that is very far from the case.

  3. It is reported today that following a study the Spanish tax authorities have declared that 55.6% of all rentals in the Canaries go unreported making it the highest region in Spain. Tax authorities are going to put their microscope on it!

    Sorry about double post, it had a mind of its own ?

  4. “Fines are now issued and upheld without a problem. ”

    You´re maybe unaware that in the last 3 years Lanzarote´s Cabildo has lost all 13 of the lawsuits brought by villa owners.

    1. Author

      Whatever you’re talking about it’s not fines issued for illegal letting by the Canarian Government’s Turismo department, which are nothing to do with a Cabildo. As I’ve also said many times previously, Lanzarote has clear peculiarities, and I’m not about to get into that. In Tenerife, and the other islands for that matter, the situation is much clearer.

      And in any case, this article is about the Spanish taxman going after undeclared rental income … from rents of all sorts for any type of rentals.

  5. Author

    Thing is, Phillip, I don’t think anyone in this discussion disagrees with you!

  6. I think I will leave this discussion as it seems to be heading the same way as many do on this subject. I have owned property in Tenerife for over 20 years, always paid my taxes and currently pay tax on my residential property, which I have never rented, even to ‘friends and family.’
    As a Magistrate in the UK I am a firm believer in upholding and abiding by the law, of whatever Country.

  7. Author

    I think that’s an important point … the law is fixed and clear. The only thing that’s unresolved at present is the Vivienda Vacacional decree which is currently frozen … but that is separate to the law, which itself is not only unchanged, but confirmed.

    I would also stress that the fines system is not a farce. Early fines were successfully appealed but subsequently the inspectorate and the courts came to a legal understanding of what was required. Fines are now issued and upheld without a problem. It might seem quiet to the public since hardly any fines are being published in the BOC, but that is because the inspectors now know what their inspection must consist of, and that includes establishing addresses where fines are properly delivered … and so no undelivered or undeliverable fines exist to be published in the BOC.

    And of course this is all a separate issue to the taxman clamping down on undeclared rental income …

  8. I think that that many properties were not purchased under the misconception that private rentals were “OK”. Any estate agent worth his salt will have advised purchasers that renting in a residential complex was illegal but that the law was not rigidly enforced. That is as a buyer rent at your own risk. Caveat emptor. This is not a blatant misconception as you have described. I don’t believe that imotive (sic) is the correct description of the circumstances prevailing, where people who were illegally renting had been caught out and were bleating about it.

    The law relating to illegal renting in residential complexes existed in and prior to 2011 and is still effective now. It is not in the ether. It is very unpleasant to own a property in a “residential” complex in Tenerife and to be constantly disturbed by people in holidaymaker mode. If a purchaser could not afford a residential property in Tenerife without relying on an illegal rental income then in my opinion he should not have purchased it.

  9. Author

    The whole point of deemed rental income tax, though, is that it’s fraudulent if people choose to pay this as the cheaper option to declaring real rental income …

  10. IP you are right on the ‘deemed/non rental tax.’ I would say the majority of people I know do not pay it and i would guarantee this to be the case generally.
    Snowbird…the issue of renting has been such an imotive subject since the inspections began in 2011 and to that date the law had been conveniently ignored by the Government. The result was, that many properties were purchased under the blatant misconception that private rentals were ok. The subsequent fines turned into a farce and the laws are still in the ether being sorted out- apart from the clear directive that a sole agency must be used.
    It is easy for us to judge people in this situation, when we have not been in it ourselves, but one thing is clear….we should all stay within the law and pay our taxes!

  11. Snowbird, by all means denounce someone for illegal letting on a residential complex but that is not the subject of this thread and not what you indicated in your first comment in the thread.

    My situation is not described by either of your two scenarios. 🙂

  12. In response to your comment “I disapprove of illegal renting”. If I were to denounce somebody it would not be because I am upset by the fact that they are not paying tax, it would be because I am sick and tired of the bloody nuisance illegal renting causes in my residential complex.

    As a matter of interest IP were you renting in a property that benefitted from a tourist licence for holiday renting? If so I have no problem. However if you were renting in a residential complex please ask Janet for my email address and give me your Canary Island address and your name and address in the UK . I am only asking out of interest. ?

  13. Yes Snowbird, I have mentioned it before and do so again because I think too many people still mix up the two issues and use non payment of tax as a reason to disapprove of holiday letting. If you disapprove of letting then by all means say so but don’t use tax as the reason. We pay tax in both the UK and Spain on our letting. It’s quite easy and no authority so far has refused the payment!

    I am in no position to say if the figure of 49.03% is correct or incorrect but whatever it is I would agree that it is probably big. The problem they have decided to address, Snowbird, is non-payment or underpayment of tax on letting (I guess holiday or otherwise) – not illegal letting. Illegal holiday letting is an issue for the authorities in the Canary Islands whereas non payment of tax is a Spanish issue.

    Phillip, I guess the same applies to the large number of non resident property owners (percentage unknown) who have never paid their Impuesto de la renta de no residents (“non letting” tax).

  14. Author

    Doesn’t matter IP. The point is that a denuncia will trigger an investigation. If all is above board, all’s well, but the taxman would rather get a denuncia than not because some of the time, if not often, there will be fraud.

    edit: Snowy was making the same point at the same time … and bear in mind, as I say in the post itself, the Agencia Tributaria thinks the same as the IR in the UK, that around half rentals are tax fraudulent.

  15. Yes Interested Party you have made this point several times before. I do wonder how can you declare to the Tenerife tax authorities that you have a rental income from an illegal activity? I am very confident that most if not all of those who are insisting on cash payments are not declaring either in the UK or in Tenerife. I have also read in another article about this latest initiative that the Spanish tax authority believes that 49.03% (their figure) of rental properties are not being declared for tax purposes. They consider it now to be a priority activity to address this problem.

  16. One comfort for the many of us who are law abiding in this area is the fact that when an owner sells a property they are unlikely to get their 3% retention back when the authorities look at the sale and check their tax payment/status. Having always declared our taxes our Gestor applied for and got back our 3 percents on both the apartments we sold.

  17. OK, my real point was “renting illegally via websites” is not the same as “not paying tax”. While, without doubt, many will be doing both “it ain’t necessarily so”! Likewise, dealing in cash is also not the same as not paying tax. Apart from the boasting scenario, anyone reporting non-payment of tax would actually be guessing.

  18. Exactly Janet! I have fellow residents who are illegally renting via websites who have actually said to me that they have never filled in any kind of tax return in Tenerife. Another one told a friend of mine that he had so much cash he just didn’t know what to do with it. He was apparently keeping it under his bed.

  19. Author

    There are also people, specifically concerning tax, who make it obvious by letting neighbours know that their apartments are for rent, or employing local friends or neighbours, and it will be very clear that everything is in cash. Neighbours who are fed up with the fraud, or perhaps just fed up with what might be illegal letting, will be prepared to denounce if all else has failed.

  20. Well I was actually going to add “…unless they boast about it.” but I thought that would be too silly.

  21. Author

    plenty of people actually boast about it … unbelievably. I was told the other day of one such person boasting in a bar that he’d been fined by Turismo but they weren’t going to stop him …

  22. But how do people know that other people are not paying tax?

  23. The Tax Authority in Tenerife should create and advertise a hot line facility where long suffering law abiding owners can anonymously report the cheats, without fear of harrassment and intimidation. Just like they have done in the UK.

    1. Author

      Tax fraud denuncias can be made online, snowy. Just click HERE and follow the instructions. There’s even an option to add attachments, if anyone wanted to scan an advert and show it to them. No denuncias can be made anonymously though.

  24. People know that they have to pay tax on all earned income in their country of fiscal residence but try to avoid it in Tenerife. We have always paid our taxes here including deemed rental income and that is the correct thing to do. Use an accountant guys and do the right thing!

  25. A number of established internet websites where Owners can advertise their properites Direct (some at a cost of €250+ a year) will see a reduction in those customers displaying their properites.

  26. Roger, there are also plenty of owners on tourist complexes that rent directly rather than go via the onsite sole registered agent and also fail to declare rental income, pay IGIC and taxes on income and profit.

  27. They should have plenty to go at as a large percentage of owners on residential complexes seems to rent and think they are all above the law much to the annoyance of people who live in their apartments but like most things in Spain nothing seems to happen and people still own multiple properties in residential places and openly advertise the fact taking cash in hand short term holiday makers breaking both letting and tax laws and becoming aggressive to any person that objects.

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