Author Topic: Rental tax / Residential tourism  (Read 9993 times)

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Belladonna

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Rental tax / Residential tourism
« on: July 20, 2013, 09:06:59 AM »
A subject that is going on forever, and is peaking again at the moment with horrid implications for all concerned.
Andrew has given a good write up on this.


The Scandal Of Mallorca's Residential Tourism

 The term "residential tourism" can mean different things. When the national government listed this as a strategic advantage in its most recent tourism plan, it had in mind tourism by foreigner owners of property, those who come for parts of the year or whose families come for parts of the year. Residential tourism, in this respect, is considered a "good thing". It is good because of the economic benefits of property purchase, it is good because of the economic benefits of service provision for maintaining and managing properties when owners are in their home countries, it is good because of the economic benefits that these owners and/or their families bring to local supermarkets, restaurants and other businesses. The national government sees this residential tourism as a strength, one to be encouraged further as part of its overall strategic tourism plan.

The national government is of course being selective in its interpretation of the meaning of residential tourism. There is a whole other residential tourism it will not admit might also be a strength. By not admitting this, it is doing tourism in general and the economy in general a huge disservice.

In a recent interview, the director general of Taylor Wimpey in Spain spoke about the great potential for residential tourism, and so he spoke about something that is in line with government thinking, but because the government will not admit that residential tourism means more than it wants it to mean, he - the director general - recognises that builders such as Taylor Wimpey are disadvantaged. And no more so than in the Balearics.

National government, having taken a strong line against the so-called illegal offer of holiday rental accommodation, is contradicting its own position. It won't admit it, because it won't or can't admit what is understood by many, including builders like Taylor Wimpey. The director general didn't wish to be drawn, but it was obvious what he thought. He was quoted as saying that "only Mallorca has spurned residential tourism".

And in Mallorca and the Balearics, this spurning means that there is the situation whereby the tax office and the tourism inspectorate are now going around knocking on doors of villas and apartments and acting in the tough way that they have long threatened to. The day has finally and truly dawned. A campaign, using information easily gleaned from the internet, of turning up at a property and demanding that holidaymakers produce evidence of legal rental, is underway.

While apartments are usually considered to constitute the illegal offer, villas and detached houses can also be a part of this. Under the tourism law, such property can be "commercialised" (i.e. marketed and advertised as tourism accommodation) in one of two ways. One is through an agency, the other is through the owner establishing a business and registering it in Mallorca. There is no other way. And either way, what really matters is that tax revenues are paid locally.

I was intrigued to hear that inspectors have been demanding to see invoices from those staying in rental accommodation. Why would someone necessarily have an invoice? Having spoken with the owner of an agency in Alcúdia, I now know. This agency gives all its tourist clients a copy of a rental contract as well as an invoice which shows IVA (value added tax). This documentation - in Spanish - confirms the legitimacy under the local tourism law of the rental.

It is interesting to note reactions of Mallorcan and Spanish people. Comments to newspaper articles about this campaign (which does also of course affect Spanish owners) are almost unanimous in condemning the government. Contrast this, though, with what is almost a complicit acceptance by the media of the government's position.

Why, I increasingly wonder, because of the massive harm the government is going to cause, is the tourism minister Delgado or the director general for tourism, Martínez, never subjected to a true grilling? It just doesn't happen. Yet, the undermining of residential tourism borders on the scandalous. It is also incompetent, because of the economic damage it can do. How can the government reconcile the potential losses from private accommodation and the losses that are being made because of the growth of all-inclusives and the general lowering of tourism spend?

Why does the media here not take the government to task? Why does it not challenge its line on rental accommodation? There is a scandal being played out. One of potentially massive economic harm, and no one seems to dare to ask questions. Why?

« Last Edit: July 29, 2013, 10:25:04 AM by Belladonna »
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tonsyl

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Re: Rental tax / Resedential tourism
« Reply #1 on: July 20, 2013, 18:57:48 PM »
I have read much about this subject and I see on another forum that some folk are getting quite excersized. I know very little about the "Residential Tourism" that Andrew speaks of, either recognised or otherwise but I get the feeling, from what I have read, that the tax situation, currently, appears to be the more serious. Just out of interest to enable me to see the matter more clearly, what is the level of tax in Spain on a rented property. As an example, how much tax roughly, apart from IVA, would be payable by the owner on nett profit per week of 200 euros, assuming that the property was not the sole income and a second property?
« Last Edit: July 20, 2013, 19:03:05 PM by tonsyl »

Eleanor

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Re: Rental tax / Resedential tourism
« Reply #2 on: July 20, 2013, 19:50:05 PM »
I think also what seems to be disregarded here is the impact on the property market as a whole. How can the market ever  begin to increase when the powers that be are making life so difficult? The majority of non residents buy with the intention of renting their property to holiday makers. The amount of tax paid by the purchaser and indeed the seller is very high compared to other countries. This is all money in the purse but if they continue to make life so difficult many  will decide not to buy in Mallorca and choose perhaps Turkey or somewhere else where property prices are much cheaper and hassle is minimal. If people take this route then every aspect of the market will be effected.  The property market will remaln where it is or even fall thus producing less property tax. Tourism will decline as people will just not put up with this handiling - this will have a large effect as not everyone wants a hotel holiday. Restuarants who are already at a struggle will close. This will mean no business tax plus those who have bought thinking they might cover a mortgage with rental won't be able to perhaps afford to keep their property going. Once re-prossessions set in then an area will have that 'the bombs gone off but no-one told me' feel. All in all just not good and very short sighted in my opinion. 

As much as I love PP and my villa I am beginning to wonder if it is all worthwhile. Mallorca is getting a name for itself - 'rip off'. Would I do it again? - I'm really not so sure!  :-\ As owners we bring much to the island including revenue. It does feel sometimes that we are in a war. It would be good if the powers that be worked with us and not make life such a constant battle.  :( Afterall without us promoting their island where would they be?
« Last Edit: July 20, 2013, 19:55:45 PM by Eleanor »
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Re: Rental tax / Resedential tourism
« Reply #3 on: July 24, 2013, 17:15:03 PM »
I would be grateful if anyone could give us any information on Tourist Inspectors.
I was called today by a cleaning lady who was in a serious panic because  her job is on the line
due to several apartment and villa owners having been fined heavily for not having a license to let.
She said she is trying to get a legal standpoint on this to see if its possible to obtain a license or whether
its a short term money making exercise. 
My husband has just returned from PP and has seen the Inspectors walking around.
It would be good to have a legal viewpoint if anyone knows anyone who can help.

This seems to be very short-sighted of the authorities as this is going to result in owners not being able to
rent their apartments, therefore not being able to pay their mortgages. Owners will place their properties on
the open market, there will be a glut of properties for sale and prices will drop significantly in order to sell.
Anyone in the know will not want to purchase a second property to let if they are aware of the licensing dilemma.  ???

Belladonna

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Re: Rental tax / Resedential tourism
« Reply #4 on: July 24, 2013, 17:57:41 PM »
I have looked on the web to see if there is anything up to date on this subject, but the best I can find is this link;

http://www.seemallorca.com/property/letting/new-reform-on-the-tenancy-act-in-mallorca.html

There is a lot of info on the subject concerning the Canaries, and its all pretty scarey re fines and court cases.

From what I have read and gleaned from reading between the lines as well, no one can rent "touristically" unless they have a licence. These are only given to detatched villas, and even then it seems that they are not given easily. Renting is allowed, but it cant be through advertising or offering services. I cannot find out what type of advertising is allowed, or what services cannot be offered. There does seem a need for some legal clarification, which wont be available freely obviously!  :-\
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tonsyl

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Re: Rental tax / Resedential tourism
« Reply #5 on: July 24, 2013, 18:56:58 PM »
Only one point to add Bella. Correct me if I am wrong but in the case of apartments, is it that they can be let without a licence, if they are let through a registered agency, i.e. Villaplus, Villasparade or Mafran for examples, who then become the licensee, not the owner?

Belladonna

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Re: Rental tax / Resedential tourism
« Reply #6 on: July 24, 2013, 19:56:44 PM »
That has jogged my memory on something I read tonsyl.  I will try and track it down again, thanks.
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andrew711

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Re: Rental tax / Resedential tourism
« Reply #7 on: July 24, 2013, 21:16:20 PM »
Tony, Absolutely not. There has to be registration of a property for an agency to "commercialise". I keep banging my head on this subject, but the tourism law (2012) is utterly unequivocal. An apartment can, under no circumstances, be commercialised, namely marketed, advertised, promoted, whatever for tourist purposes. It makes no difference if it is commercialised privately or through an agency, as neither is legal. Villas, detached houses, so long as they are registered (if they can be registered) are a different matter but there is an issue with these properties, as in whether their "commercialisation" is in accordance with the two ways that the law permits, i.e. through an agency or through the establishment by an owner of a business which offers certain services. Bottom line is that, even with villas, the local authorities want the tax revenues. This is all they are interested in. The rest of it, quality standards, health and safety, blah, blah, is just garbage.

Bonyslad

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Re: Rental tax / Resedential tourism
« Reply #8 on: July 24, 2013, 21:19:48 PM »
Only one point to add Bella. Correct me if I am wrong but in the case of apartments, is it that they can be let without a licence, if they are let through a registered agency, i.e. Villaplus, Villasparade or Mafran for examples, who then become the licensee, not the owner?

Tonsyl,

 Correct me if I'm wrong anybody but for an apartment to be let legally the whole development has to be registered for holiday letting and this entails legal requirements for fire exits and the provision of reception facilities etc. Thought this was embedded in the new Tourism Law and it is an onus on Communities to therefore agree to register having complied with the law or face the legal challenge if owners independently let . It is a community responsibility as well as an individual one to ensure that the legal requirements and individual tax dues are met. Internet advertising is a rich source of information to the authorities which is why when I , worked for HM Treasury , was amazed to see software developed to trawl internet advertising by British owners in Florida initially but to be extended globally.

 Afraid Big Brother is here now !!!

 BL  :(

 
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Bonyslad

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Re: Rental tax / Resedential tourism
« Reply #9 on: July 24, 2013, 21:22:03 PM »
Sorry Andrew, posts have crossed but weren't we banging on about this back last winter when the law was passed ???

 Folks were warned so why the surprise ??

 BL  >:(
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tonsyl

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Re: Rental tax / Resedential tourism
« Reply #10 on: July 24, 2013, 22:15:58 PM »
Thanks for that guys, I get the general situation, clearly I was under a mis-apprehension. One last question if I may, does this law apply to everyone, Spanish nationals included?

tonsyl

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Re: Rental tax / Resedential tourism
« Reply #11 on: July 24, 2013, 22:23:20 PM »
Forget that last question. I have just re read Andrews article of a couple of days ago and I have my answer. However, I am intrigued, because it may apply to us, which is to say that if an apartment has been let by it's Spanish owner for a number of years, taxes paid, permits in the form of registration in order, would a new licence need to be obtained or does the old rule still apply?
« Last Edit: July 24, 2013, 22:33:11 PM by tonsyl »

Mary Lorenzo

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Re: Rental tax / Residential tourism
« Reply #12 on: July 24, 2013, 23:24:29 PM »
And here is a translation (of sorts) of a recent spanish blog on the subject....

http://blogdejuanpardo.blogspot.co.uk/2013/06/ley-de-arrendamiento-de-viviendas.html

tonsyl

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Re: Rental tax / Resedential tourism
« Reply #13 on: July 25, 2013, 06:53:14 AM »
Thanks for that Mary, interesting times eh? Until this is tested in the courts I can see the matter rumbling on for some while yet.

andrew711

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Re: Rental tax / Resedential tourism
« Reply #14 on: July 25, 2013, 07:12:51 AM »
The change to the law on tenancies (which is what the blog refers to) wasn't that important for Mallorca. The previous law was cited here in a confusing fashion. Under it, it was legal to rent a property out so long as it wasn't advertised (commercialised) and no services were provided. It was largely irrelevant though because most property has always been advertised and has been specifically for tourist purposes. The new law gives the regions all the power they want to impose whatever law they wish, and as the Balearics have a law, there is now no debate. Apartments - illegal. End of story.