Buying Spanish property to rent seems like a good idea as you can make a steady income from the rentals until you are ready to retire. You will then have a home in the sunshine to go to if you want to move abroad. For example, if you pick a popular holiday spot like Ibiza or you are looking at cheap bargain properties on the Costa Blanca, you can generate a nice income, even if you only let your apartments in the high season. Looking at rental websites shows me many Ibiza villa rentals for next season are already fully booked.
But it is important to understand the Spanish laws for renting out property and the taxation implications before you sign on the dotted line.
Foreigners buying Spanish property to let have to declare their income from the rental both in Spain and in the UK although you can claim in the UK for the double tax and the cheapest one will be refunded. In Spain you have to submit a form Modelo 210 either for each rental received or submitted quarterly no later than 15 days after the end of the quarter. You have to name the tenants and their NIE numbers together with how much rent they paid and list any expenses deducted.
The tax on rental property in Spain is charged at 24%, but if you hire a Spanish lawyer they will take care of all the legal requirements for renting out your property in exchange for a percentage of the monthly rent. They will also draw up the necessary contracts to meet the Spanish legal requirements.
When buying a Spanish property to let, it is best to go for long-term rentals of at least a year. This type of rental does not require any license although you are liable to charge VAT at the current rate on your monthly rent and pay it to the tax office (Hacienda) on a quarterly basis.
Because Spain is very protective of its hotel trade it has introduced new laws in 2013 making it illegal for anyone to let a property short term for holiday lets unless the owner has obtained a licence for tourism approved by the local authority. Renting your property on short-term lets without a licence can lead to heavy fines being imposed but this does not apply to lets of a year or more.
Most areas in Spain produce a free paper with a property rental section, which is the main place people seeking long-term lets go to first.