Which costs can you really deduct when investing in Spanish property?
Which costs can you really deduct when investing in Spanish property?
The truth about tax write-offs, VAT and business vehicles
Welcome to part 2 of our blog series based on the Verhome Podcast with legal expert Carlos Savenije Martin. In this post, we tackle one of the most confusing aspects for foreign investors in Spain: What costs are actually deductible, when can you recover VAT, and what are the traps around using a company car through your Spanish SL? Let’s clear the air with real-life examples and practical tips.
1. Not everything is deductible – here’s why
One of the most common mistakes investors make is assuming all costs related to their property or renovation are tax-deductible. In Spain, the burden of proof lies with you. This means every deduction must be clearly justified, documented, and directly related to a business activity.
Examples of non-deductible items:
- Renovation costs without proper invoices or VAT documentation
- Expenses for private use properties (even if rented occasionally)
- Furniture or decor used for personal enjoyment
💡 Tip: Always separate private and business use clearly — mixing them weakens your deduction claim.
2. When can you recover VAT on renovations?
Recovering VAT (IVA) is possible — but only if the property is used for active business purposes, such as short-term rentals with hotel-like services.
Requirements for VAT recovery:
- Property must be rented out with services like reception, cleaning, linen change
- Tenant turnover must be regular (e.g. tourists, not long-term tenants)
- Your company must issue invoices with VAT and submit quarterly returns
Common mistakes:
- Expecting VAT refund on private renovations
- Claiming VAT on materials without a matching business activity
💡 Example: If you renovate a villa and rent it on Airbnb with weekly cleaning and linen service, VAT may be refundable. If you only use it privately — no refund.
3. The trap of company cars in Spain
Many investors consider buying a car through their Spanish SL to use for trips to and from their property. On paper it sounds smart — but tax authorities often see this differently.
Rules to know:
- VAT on car purchases is rarely fully deductible (usually capped at 50%)
- Personal use must be minimal and well-documented
- Deducting fuel, maintenance, and tolls is only allowed for verified business trips
💡 Warning: Unless you’re running a genuine real estate business in Spain, claiming a car as a business asset is risky and often flagged in audits.
Be honest, be prepared
Spain offers tax benefits — but only when your investment structure and activities are crystal clear. Work with professionals, keep detailed records, and avoid “creative” interpretations that could cost you later.
🎧 Want the full story with legal insights and real examples? Watch this episode of the Verhome Podcast featuring Carlos Savenije Martin.
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