The tax nobody pays in Spain

The curious case of Tax on Rental Contracts

LAST UPDATED: 31 Mar, 2016 @ 09:09

Antonio Flores
Antonio Flores

A FORTNIGHT ago I was attending the Talk Radio Europe legal clinic when a listener, who happened to be Myra Azzopardi from the Citizens Advice Bureau Spain, mentioned a widely unknown tax that nobody ever pays: transfer tax on rental property.

While only a minority of lawyers asked will admit to knowing it, or even having heard of it, the majority of the population is oblivious to its existence.

Older people do recall that, once upon a time, landlords would buy tenancy template contracts from any tobacconist (below), where the applicable transfer tax was inserted.

This has gone out of fashion in a big way and nobody bothers.

In Madrid, the regional tax office has started a massive campaign to remind tenants of their obligation to pay this tax, following technical upgrades to their IT systems that enables them to cross-reference data.

The revenue received in 2015 was still minute: around €600,000 for the year.

In Andalucia, I am yet to find a tenant who has ever paid it, even if the tax is negligible in  comparison to other forms of revenue.

For instance, a five-year contract where the tenant pays €850 month will attract €204 for the full contract duration, and a further €40.80 for every year it gets extended.

The law also states that owners can be made responsible for payment of this tax if the tenant fails to do so.

Article Nine of the applicable law confirms this: “In tenancy agreements, owners will be held liable if he/she has collected the first rental without demanding proof of payment of tax.”

Bizarrely, the law gives the tenant 30 days to submit the tax declaration from exchanging contracts, which we do know always coincides with the first rental payment.

With such conflicting rules, no wonder no one can be bothered.

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Lawyer Antonio Flores is the legal columnist for the Olive Press. Antonio has been practising law since 1997, year in which he began working for a large law firm in Marbella as a Property Lawyer. In 1998 he left the company he had joined a few months earlier, and used his knowledge and the experience gained to build his own practice. He is known throughout the community as independent, reputable and trustworthy. Through a combination of strong work ethics, determination and international exposure, his competence of Spanish Law is unparalleled and demonstrated through his fluency in English and Spanish.


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