Guide for Foreign Property Investors in Spain

GUIDE FOR FOREIGN INVESTORS: VAT RECOVERY ON TOURIST APARTMENTS

 

1. VAT RECOVERY AS A BUSINESS OWNER OR PROFESSIONAL

Client profile: An individual or legal entity purchasing to rent out the property professionally and registering as a business in Spain.

 

Steps:

1. Alta en Hacienda (modelo 036 o 037).

2. Declaración de ingresos por alquiler turístico y gastos asociados.

3. Presentación de modelos trimestrales de IVA (modelo 303) y resumen anual (modelo 390).

4. Posibilidad de deducir el IVA de la compra en la primera declaración.

 

Key condition: The rental activity must be maintained for at least 5 years to avoid repayment of the deducted VAT

 

2. PURCHASE THROUGH A COMPANY

Profile:

Businessperson or investor buying through a foreign company or a Spanish limited company (S.L.).

Advantages: The company may register as a VAT taxpayer. VAT is deductible as a business expense. In some European countries, VAT recovery can be consolidated fiscally.

Obligations: Quarterly tax returns. VAT invoice register. Possible audits by tax authorities.

 

3. PRIVATE BUYER WITHOUT TAX REGISTRATION

Cannot recover VAT if not registered as a business or if no economic activity is declared. The purchase is treated as a final consumer.

 

ALTERNATIVES AND RECOMMENDATIONS

· Hire a tax advisor to handle registration, filings, and VAT recovery. · Consider establishing a Spanish limited company (S.L.) for better fiscal structure or multiple investments. Legal Note:

· Recovering VAT involves quarterly tax obligations.

· If the property’s use changes within the first 5 years (e.g., for personal use), a proportional amount of the deducted VAT may have to be repaid.

 

HOW TO REGISTER WITH THE SPANISH TAX AGENCY AS A NON-RESIDENT

· Obtain a Spanish tax ID number (NIE for individuals, NIF for foreign entities).

· Submit form 036 with details of the tourist rental activity (IAE code 685).

· Appoint a tax representative if residing outside the EU.

· File forms 303 (quarterly VAT), 390 (annual VAT summary), and 347 (transactions with third parties).

 

TAXES APPLICABLE TO TOURIST APARTMENT INVESTMENT

Non-resident individual:

· VAT: 21%, deductible if business activity is declared.

· IRNR (Non-Resident Income Tax): 19% if EU/EEA resident or 24% if non-EU resident.

· IBI (Property Tax) and local tourist fees where applicable.

Legal entity (foreign company or Spanish S.L.):

· VAT: 21%, deductible if used for business.

· Corporate Tax: 25% on net profits.

· IBI and broader tax/accounting obligations.

 

APPLICABLE VAT RATE FOR TOURIST APARTMENTS

· 10% VAT rate applies when hotel-like services are provided (cleaning, customer service, etc.).

· This is the model Orbesol offers through its comprehensive management service.

 

PURCHASE AND OPERATION STRUCTURE

 

I. PURCHASE REGIME

The tourist apartments are legally classified as permanent-use tourist dwellings (regulated under Decree 174/2018, of July 21st, 2018, issued by the Region of Murcia), which means their acquisition is subject to 21% VAT (Value Added Tax). Far from being a tax burden, this condition represents a financial advantage for the buyer/investor. The VAT amount can be fully recovered, provided that the buyer fulfills the corresponding tax obligations before the Spanish Tax Agency and allocates the apartment for tourist exploitation through a contract with the management company. This makes the operation a fiscally efficient investment, particularly attractive for non resident buyers and vacation rental professionals.

 

II. OPERATION REGIME

 

To ensure the proper functioning and profitability of the complex, all apartments must be managed by a specialized entity responsible for marketing, administration, customer service, and full property maintenance.

The owner has two options:

· Assign the apartment for full-year management and receive rental income according to the contracted model.

· Reserve certain periods for personal use and allocate the remaining time for tourist exploitation by the management company.

 

In both cases:

· Specific agreements are formalized through a contract with the management company.

· The owner assumes no operational risks and does not handle bookings directly.

· All operational processes are transparent, automated, and fiscally documented.