This question will have different answers if you are the owner or if you are the tenant.

There are two categories of rental contracts: professional and private.
When a contract is private, it could be for a season, or for a long term period (by law, it is for five years at least, even when the contract is only signed for just one year).
The owner can ask for no more than two months rent in advance (“fianza”);  taxable amounts are:
100% of the rent when seasonal, 50% of the rent when it has been signed for a long period, nothing if the tenant is not yet 30 years old.
The owner should ask how much the tenant's income is to be sure that he/she will be paid. Also, for both parties, it is important to be aware of any internal community rules.
When a contract is professional, 100% of the income is taxable (nevertheless some amounts such as interest can be withdrawn in the annual tax form).
It is considered by law as an economic activity and subject to IGIC (the Canary Islands' VAT); if the tenant hires one person, a withholding tax called “retenciones” should also be paid to Hacienda (the tax office); the conditions of the contract will sometimes state that all taxes above the monthly amount should be paid by the tenant who would then pay much more than he originally expected.
Also, for both parties, it is important to be aware of any internal community rules.
So, whether you are an owner or tenant, please do not just download a standard contract from the internet. You  should seek advice from a professional.
Stéphane MERCIER, economist and tax expert. Expertos de Tenerife SL..