For the past years one of the main aspects which have driven our economy’s growth has been investments in real estate assets across Spain and to a large extent, such came from foreign investors. Many were intended on a buy-to-let basis.
Clearly one of the main aspects prior to taking the decision is how will my income be taxed, especially that coming from rentals, since depending on how the investment is made it will be taxed at a rate or another.
In practice, when investors are willing to acquire a certain amount of assets, as to limit any possible liabilities, they decide to incorporate a Spanish company in which case there are little doubts on how income will be taxed. However, some non-tax-residents investors decide to acquire assets directly under their own name, in this case, depending on the particulars of the case it may be deemed by the authorities that there is an actual rental business, thus, a higher tax rate would apply.
Several recent rulings have clarified under which circumstances the authorities can deem that there is a rental business being undertaken and not just a simple rental. These rulings are of great importance as to provide a safer and clearer view of our tax system and its interpretation by the authorities.
For all the above it is crucial to thoroughly consider all details before carrying out your investments as well as to decide the Spanish advisors who will be joining you in your investments.