If you are the owner of a flat in Mallorca and you want to rent it out, check out what’s more convenient for you: A rental contract for a main residence or a holiday rental? In this post we explain the main differences and tax advantages of each option, as well as the legal requirements that you must meet.
A rental contract for a main residence is a contract that is signed for a minimum period of five years (or seven years if the landlord is a legal entity). That has the purpose of allowing the tenant to establish his or her habitual residence in the flat. The holiday rental, on the other hand, is a rental for short periods, usually for days or weeks. It has the purpose of allowing the tenant to enjoy the flat for tourism.
From the point of view of the owner, the rental of a main residence has some tax advantages over the holiday rental. For example, the owner can deduct 60% of the net income obtained from the rental in the income tax (As long as the tenant is between 18 and 35 years old and has an income higher than the IPREM).
In addition, the owner can deduct the necessary expenses for the conservation and maintenance of the flat, as well as the interest and amortization of the mortgage loan, if any.
The holiday rental, on the other hand, has no specific deduction in the income tax, unless it is an economic activity. In this case, the owner must register in the regime of self-employed and pay taxes according to the regime of direct estimation or according to the regime of modules. In addition, the owner must declare and pay VAT quarterly, applying a rate of 10% on the rental amount.
Another advantage of renting a main residence over a holiday rental is that it involves less work for the owner. The holiday rental implies a higher turnover of tenants, which requires more dedication to cleaning, maintenance, advertising and management of reservations. On the other hand, the rental of a main residence allows to establish a more stable and long-term relationship with the tenant. This reduces main costs and inconveniences.
Finally, it must be taken into account that: In order to carry out a holiday rental in Mallorca, it is necessary to have a holiday license issued by the Island Council. However, there is currently a moratorium that prevents applying for new licenses until the Sectoral Tourism Plan (PDST) is approved. This measure aims to curb mass tourism and facilitate access to housing for residents. Therefore, if you do not have a valid holiday license, you can only choose to rent a main residence.
In conclusion, renting a main residence offers more tax advantages, less work and more legal security than renting a holiday flat in Mallorca. That is why we recommend you to choose this option if you want to make your flat profitable without complications.
