08 August 2020

Supporting Our Owners with Holiday Rental Laws

At the bottom of the Los Claveles DOA Facebook home page, under the heading ‘Group Rules’, Roger Barrow warns that private renting may breach Spanish Holiday Rental Law. A similar message has been posted by the host of the El Marques Facebook group.

This law (7/1995) rules that there can be only one lettings agency on a resort or Community complex and it must be licenced; it is commonly known as the Sole Lettings Agency Law. Under the law, residents must apply for a licence to rent which is commonly refused and those that did not apply were prosecuted.

What Mr Barrow fails to mention is that that law is incompatible with the EU Bolkestein Directive (European Directive 2006/123/EC) which explicitly forbids the imposition of a trading licence before commencing any general non-regulated business activity. The Directive applies to all individuals, partnerships and companies.

The Spanish authorities initially commenced court action against private residents, with threats of fines of several thousand euros being imposed before the Government did a u-turn and ceased the legal action, fearing the cases would be referred to the European Court of Justice where the law would be overturned.

In June 2018, a Lanzarote resident who had been refused a licence to rent by the authorities took the matter to court where the High Court in Las Palmas ruled in favour of the resident. The case was just one of numerous which found that Canarian Laws are incompatible with EU law. (Page 5 of https://gazettelife.com/pdfs/GazetteLife-July-2018.pdf )

https://tenerifeguru.com/search-property/tenerife-property/tourist-rental-law-update/ gives the latest July 2020 update.

At the bottom of the article it says “Some of the ‘sole agents’ would appear to have reached the same conclusion. Having now been abandoned by the Tourist Inspectors, a minority are resorting to bully-boy tactics to bluff and intimidate non-compliant owners. Such tactics range from interrogating rental tourists upon checking in, putting threatening letters under doors, or even denying tourists and owners in non-compliant apartment’s access to basic community facilities. Needless to say, any such actions are illegal should be vigorously challenged.

Further proof that the EU Directive 123/2009/CE (the Bolkestein Directive) is applicable to the Canary Islands came in 2015 when Spain’s State attorney, on behalf of the President of the Spanish Government, successfully filed an appeal in Spain’s Constitutional Court against the Canary Islands Law 2/2013 on the basis that sections of the Law restricted the Free market and as such was in contravention of EU Directive 123/2009/CE.

Law 2/2013 regulates the planning of coastal and urban developments and the sections that contravened 123/2009/CE were aimed at ensuring that only developments of 5 stars or above could be built and thus were in breach of the ‘Free market’.

Directions to the legislation regarding the tax agreement between the UK and Spain in respect of timeshare rental can be found by following this link https://www.boe.es/buscar/act.php?id=BOE-A-2014-5171

The salient parts are:

Article 4 relates to Real Estate Income.

Section 4

4. When the ownership of shares or participations or other rights directly or indirectly attributes to the owner of said shares or participations or rights, the right to enjoy real estate, the income derived from the direct use, lease or partnership, or use in any other form of such right of enjoyment may be taxed in the Contracting State in which the real estate is located.

And, at the bottom of the page:

The Protocol to the Convention between the Kingdom of Spain and the United Kingdom of Great Britain and Northern Ireland for the avoidance of double taxation and the prevention of tax evasion with regard to taxes on income and on wealth

Under article IV

IV. In relation to section 4 of article 6 (Real estate income).

Income derived from real estate may not be attributed to those who are holders of the rights to enjoy said real estate by virtue of a timeshare contract, when their enjoyment does not exceed two weeks per calendar year.

That is not to say that the income will not necessarily be taxed by HMRC who seem to give slightly confusing advice on the matter.

Club Los Claveles Committee

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