Leases
of
urban
properties
in
Spain
are
regulated
by
the
new
Urban
Leases
Act
of
1994
which
has
brought
about
several
important
changes
to
the
old
system
under
the
1964
act.
The
new
act
applies
not
only
to
commercial
and
domestic
dwellings
but
also
to
holiday
and
seasonal lets.
One
of
the
important
items
governed
by
the
act,
and
relating
to
long-term
leases
is
the
tenants
rights
to
an
early
resolution
of
the
contract
with
very
low
penalties
and
the
benefits
of
the
statutory
automatic
extension
of
the
duration
of
the
lease.
If
you
intend
to let
your
property
you
should
seek
a
copy
of
this
act
and
ensure
you
have
legal
advice.
For
properties
let
in
the
Canary
Islands
as
tourist
accommodation,
there
is
a
special
act
(of
1995)
that
states
a
professional
property
agent
has
to
be
used.
The
agent
must
hold
an
official
licence.
Owners
failing
to
comply
are
subjected
to
heavy
fines.
The
tax
rate
on
rental
income
is
either
25%
or
35%
depending
on
whether
or
not
you
are
deemed
to
be
a
permanent
resident
in
Spain.
What
may
appear
strange
to
us
is
that
the
tax
is
paid
by
the
tenant,
a
deduction
for
the
tax
is
made from
the
rental
before
the
net
amount
is
passed
on
to
the
owner.
Insist
on
proof
that
the
tax
payment
has
been
made
on
your
behalf.
Any
income
from
rent
received
in
Spain
by
non-residents
is
subject
to
a
payment
of
a
flat
rate
of
25%.
Even
if
the property
is
not
rented,
owners
are
still
liable
for
the
income
tax,
calculated
on
deemed
letting
income
at
the
rate
of
2%
of
20%
of
the
official
property
value.
Arrange
for
the
tenancy
agreement
to
be
drawn
up
by
a
gestor
(a
Spanish
legal
representative).
Any
interest
payable
on
a
loan
is
not
allowable
against
the
rental
income,
even
though
UK
tax
is
due
on
the
income
if
you
are
a
UK
resident.
There
is
a
treaty with
Spain
that
any
Spanish
taxes
paid
to
be
offset
against
UK
tax.
When
the
property
is
sold
and
the
proceeds
are
invested
in
another
principal
and
habitual
home
then
no
Spanish
Capital
Gains
Tax
is
payable
(as
long
as
the
repurchase
is
within
2
years
of
the
disposal).
Alternatively
if
the
property
is
owned
for
more
than
10
years,
then the
CGT
liability
disappears.
This
does
not
mean
however,
that
your
liability
to
UK
tax
also
disappears.
See what rights tennant has here
