Each quarter tenants of business rentals have to pay to the Hacienda 19% of the rent, which is withheld from the payment due to the owner of the premises. This is done by means of “modelo 115“. (tax-form #115)
What is withheld? Tax or retention?
AS a way to ensure the payment of income tax, the law puts the payer of the service/salary/rent under the obligation to withhold part of the money due and pay it directly to the Tax Agency. This is done on behalf of the one receiving the income. In the case of tenants, the owner of the premises must include in their invoices a section for retentions, a reduction of the amount due, which the tenant will pay towards the owner’s own tax.
The payments done by means of modelos 115 during the tax year need to be consolidated in Modelo 180, which is to be submitted once a year during the month of January. This does not involve a payment but it is merely a summary with some additional information about the payments done during the year.
Likewise, at the end of the tax year, the owner of the property can request a certificate showing the amount of tax that has been withheld that he will use at the time of his own tax return, as proof of payment.
Deadline: by the 20th of April, July, October and January.
Payment: 19% of the rent amount.
When are you obliged: If you rent premises ( office, storehouse, workshop…)
Notice: The most frequent misconception related to the payment of retention is believing that somehow they are your own income tax. In the situation where there is no business profit, many object to “having to pay tax”. However, this is not the companies tax, but part of the money that should have been included in the invoice but has been withheld temporarily by the company.
Warning: The obligation falls on the tenant. If the tenant pays the total amount to the owner without withholding the corresponding part, on finding out, the tax man will claim the money from the tenant even if it means having to pay that money twice!
See deadlines of most common “modelos” in this table.