Modelo 400

When applying for a VV License as a non-resident of Spain, you are asked to provide your Modelo 400. The Modelo 400 is an agreement with the Canarian government which commits you to charge and pay IGIC. IGIC is the Canarian version of VAT (in the UK) and is a 7% tax (unlike the UK which is 20%).

Before 2024, any non-resident renting their property to holiday makers who's revenue was under €30,000 did not need to charge IGIC. From January 1st 2024 this rule changed and now ALL sales (bookings) must include IGIC. You can add this to your pricing or eat the cost yourself. However, as soon as a Modelo 400 is issued, you will be legally responsible to pay IGIC on your revenue on a quarterly basis. This should be done via your Spanish accountant using a form called Modelo 420.

This is a serious financial commitment and should not be considered lightly. Speak to your accountant about this (they should have already discussed this with you in January 2024...) to ensure you are fully aware of the implications.

A VV cannot be applied for without a Modelo 400. Period.

Non Resident tax in the Canaries:

If you are a fiscal resident in a European country (including Iceland, Norway and Liechtenstein), you can deduct expenses and you pay 19% of the profit in tax.
If you are a fiscal resident in a non-European country, you cannot deduct any expenses and have pay 24% of your gross income.

If you rent out your property in Spain, you will also owe taxes to the Spanish State. Don’t forget that if you rent out for a short period of time, you will also have to applyu for a VV License. the Canaries has taxing rights, since the property is located on its territory and the income is therefore generated here.

To start rental activity in Spain is equated with a commercial activity and is therefore subject to the VAT rules that Spain has, the 21% IVA on the mainland and the 7% IGIC on the Canary Islands. (excluding other regions)

THERE ARE NO MORE EXCEPTIONS TO THIS RULE AS OF JANUARY 2024. This means that the standard rule is that every landlord who is a non-resident is subject to IGIC in the Canary Islands and must charge this to his customers/tenants.

The costs that may be deducted from the rental income for EU citizens (you are Irish, Polish…, have a second residence in Spain that you rent out) are the following:

Costs associated with the repairs and conservation of the property.
Interest on your mortgage loan (note: this loan must be registered in Spain!)
Taxes, such as the council tax (IBI/SUMA)
Other costs: water, electricity, etc.
Personal services: such as the cleaning, our invoices etc.
You can also write off your purchase costs, but we are not in favour of this.

These costs can only be deducted and contributed prorata based on the quantity of nights rented in the calendar year i.e. if you rent for 182 night out of 365, you can deduct 50% of your expenses from your tax return.

In a simple example: You have rented 60 out of 90 nights in the past quarter (January, February, March) and for this you have received € 1,000. All costs that can be deducted amount to € 200.

Then we have the following calculation:

60/90 = 66.67% of the nights of the past quarter were rented.
66.67% of the total costs may be deducted: €200 x 66.67% = €133.34
taxable income: €1000 – €133.34 = €866.66
€866.66 x 19% = €164.67 to be paid to the Spanish tax authorities.

This example does not take into account any IGIC you owe.

IF YOU RENT OUT ON SHORT TERM/HOLIDAY RENTAL IN THE CANARY ISLANDS or LONG TERM TO A COMPANY IN THE CANARY ISLANDS:

You or your Spanish accountant must complete the form Modelo 420 every three months before the following dates, so that you have the necessary basic data to do the calculations for your return:

1 to 6 JANUARY for the rented period from October – November – December
1 to 6 APRIL for the rented period from January – February – March
1 to 6 JULY for the rented period from April – May – June
1 to 6 OCTOBER for the rented period from July – August – September

Villa Check In are able to apply for your Modelo 400. The cost for this service is €150 + IGIC and you can request this via our Contact Us Form.