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An analysis by Garrigues, Taxand Spain
Elia Pons and Adrián Arroyo from our Spanish firm Garrigues have published an article on the complex taxation of holiday rental income earned by non-residents in Spain.
The tax treatment of such income depends on whether it is classified as business income or real estate capital, as well as on the existence of a permanent establishment (PE) in Spain – factors that are particularly significant for non-EU residents.
While EU residents can generally deduct related expenses regardless of classification, third-country residents may only do so if they operate through a PE. The Spanish Directorate General of Taxes (DGT) typically applies domestic Personal Income Tax rules when classifying this income, often focusing on whether hotel-like services are provided. This approach, however, raises questions about consistency and alignment with OECD guidance.
Given these complexities, a case-by-case assessment is essential to determine the correct tax treatment. You can read the full article in more detail here.
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