Tax consequences of community rentals

By José Luis Navarro Thursday, 23 April 2015 13:33 0
Tax consequences of community rentals

OFTEN a community committee will decide to rent out some part of the community not in use to generate extra income.

For example; an empty apartment previously but no longer occupied by a concierge, part of the roof to a mobile phone mast company, an empty local previously used as a sales office, an unused sports facility or a community parking area. This is quite common and on the surface would appear to be a good idea but there are consequences for both the community and the owners that may easily be overlooked.

 The community is actually conducting business and as such is required to make a tax declaration and pay tax, specifically IVA (VAT).

Any income from any rental, with the exception of income from the rental of a domestic dwelling i.e. a house or apartment, must include IVA, currently charged at 21%. A 303 tax declaration form must be submitted every quarter to the tax office and any tax due paid. In addition in February of the following year, a final declaration on Form 390 showing the total annual rent received must also be submitted.

 Furthermore, if the rental income received by the community in any one year, be it for roof space, an empty local, parking or an apartment (domestic dwelling) exceeds €3,005.06 - the Euro equivalent of 500,000 Ptas - an additional declaration has to be made on Form 347.

Plus another declaration on Form 184; declaration number 184 should not only include the details of the community but also the names and NIE or NIF numbers of each and every one of the owners, as well as their percentage share (cuota) within the community.

Consequently, each owner should then show on their own personal tax declaration their percentage share of the community rental income, regardless of how small it is.

 Although €3,000 (3,005.06) sounds like a lot of money it is only equal to a rent of just over €250 a month. Even an annual rent of €4,500 in a community of 150 owners would only produce an income of €3.00 per owner.

Failure to file this or any other tax declarations, could result in a fine for either the community, the owners or both. To complicate things further, some owners up until this point may not have even been required to make a tax declaration. Now theoretically they do and even worse, all of the above declarations are usually best compiled and presented by an asesor (accountant) who will understandably charge for their services.

 So it is all looking to be possibly nothing short of an own goal. What started out as a good idea to generate a little income for the community may well end up as quite a complicated puzzle with some owners unwittingly breaking the law for what is usually a relatively small amount of money.

 This is not necessarily so, this is only an example of how, through simple unawareness, things can easily get out of hand especially with rentals.

There are however serious fines for not complying with tax regulations which means administrators must be very careful to ensure that community accounts are kept accurately, tax declarations made properly and that all the owners are kept in the picture as far as their tax obligations are concerned.

 As usual we the solicitors for Intercala Administration advise the readers of our monthly article to seek competent advice in all matters relating to the law.

Many of our previous community law corner articles published in the Euro Weekly News are now available to read online at

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