In the Canaries, as the tourism sector rose, so it did the leasing of villas as an alternative to apartment and hotel holidays. Many tourists choose to rent a villa so they can "feel more at home".

The Canary Islands Government is aware of the huge amount of money this generates for the foreign market.

Many villa owners, who in most of these cases are non resident owners, rent villas from the UK mainly, through different means:

1. They can rent the properties directly from their countries.
2. Or through travel agencies which attract potential tenants.
3. Or through web sites (there are lots of villas for rent in the Internet)
4. Or through foreign press or specialized magazines.

However, many of the incomes generated in this business sector, which is currently going through some economic problems (there are lots of villas in the Canaries market), are not paying any kind of tax at all, nor to the Spanish Government nor to any foreign Public Treasury (mainly British and German). On this matter it is necessary to explain that there is a tax information exchange between the EU countries. It is commonly believed that taxes are paid by non resident owners in their own countries. But that is a serious mistake as the property is in the Spanish territory, and although the owners are non resident individuals, they are subject to tax payment within this territory.

Let's analyze the taxes these owners have to pay, so they can be considered completely legal with regard to tax payment:

REGISTRATION WITH THE TAX AUTHORITIES. All kind of business to be developed within the limits of this territory have to be registered with the Spanish tax authorities.

PROPERTY TRANSFER TAX. A villa may be acquired by a physical person or a company. When acquiring a property in Spain, the property transfer tax needs to be paid; no matter if the buyer is a physical person or a company.

IGIC (Local VAT). Very few villa owners who are leasing their properties remember to make the quarterly payments of local VAT.

IRPF (Personal Income Tax). Many non-resident owners who have acquired their properties as individuals "forget" to make the quarterly payments of this tax, which is payable on the generated incomes; they also seem to forget the annual Capital Gains Tax.

CORPORATION TAX. Lots of companies which are owners of villas use to "forget" to pay the annual corporation tax, as well as to deposit their annual accounts in the trade registry.

It is because all these reasons that tax inspections are being intensified. It is extremely easy to find out in this kind of business (by simple inquires on the Web, Land register, notaries public, water and electricity bills, etc...) that many owners are "forgetting" to pay their taxes in Spain. It is because of that that our best advice is to review your tax situation in order to avoid unpleasant surprises which imply serious economic consequences.