Tax obligations when renting out Spanish property as a non-resident

Tax obligations when renting out Spanish property as a non-residentTaxes & Finance
  • 19.05.2025
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Tax Obligations When Renting Out Spanish Property as a Non-Resident

With Spain’s vibrant culture, idyllic coastlines, and thriving tourism industry, many property owners find lucrative opportunities by renting out their Spanish properties. However, non-resident landlords must pay close attention to Spain’s intricate tax regulations to ensure legal compliance and avoid costly penalties. This comprehensive guide explores all tax obligations, processes, and best practices for non-residents renting out property in Spain.

Table of Contents

Introduction to Non-Resident Taxation in Spain

Spain is one of Europe’s most popular destinations for tourism and property investment. Non-residents—commonly defined as individuals who spend less than 183 days per year in Spain—often purchase properties to rent them out on a short-term or long-term basis. Although these rental activities can be profitable, Spanish authorities rigorously monitor and tax foreign property owners. It is crucial for non-residents to fully understand their tax obligations, which differ from those of Spanish residents, to avoid fines and unexpected tax bills.

In this article, we dissect the critical aspects of non-resident tax rules for renting out property in Spain, from defining resident status to calculating taxes, deducting expenses, and understanding your reporting obligations.

Defining Non-Resident Status

The Spanish tax system distinguishes between residents and non-residents based on where an individual spends most of the year and other ties to Spain. Non-resident tax obligations are specifically tailored to individuals and entities that do not meet the residence criteria.

Resident vs Non-Resident Criteria

  • You are considered a tax resident in Spain if you either:
    • Spend more than 183 days in Spain in a calendar year, regardless of your formal residence permit.
    • Have your main center or base of economic interests in Spain.
    • Your spouse and/or dependent minor children habitually reside in Spain.
  • If none of the above applies, you are generally classified as a non-resident.

Non-residents are only taxed in Spain on their Spanish-source income, including rental income from Spanish properties.

Types of Rental Properties

Tax treatment can vary depending on the nature of the rental activity. Properties can be rented out as:

  1. Long-Term Lease: Typically involves residential agreements longer than one month, with tenants as their main domicile.
  2. Short-Term or Holiday Rentals: Includes rentals via platforms like Airbnb, Booking.com, etc., usually for vacationers. These may have additional registration and VAT requirements depending on the region and services provided.

Understanding whether your arrangement is classified as a long-term or holiday rental is important for determining applicable tax rates, deductions, and legal requirements.

Applicable Taxes for Non-Resident Landlords

Non-resident rental income in Spain is subject to a range of taxes. The primary types include:

  • Non-Resident Income Tax (IRNR): Imposed on income derived by non-residents from Spanish sources, including rental income.
  • Local Property Taxes (IBI): Municipal property tax paid annually.
  • Wealth Tax: Applies to property owners whose Spanish assets exceed regional or national thresholds.
  • Value Added Tax (VAT/IVA): Potentially due for certain types of holiday rentals with hotel-like services.

Let’s explore the key tax—Non-Resident Income Tax—in more detail.

The Non-Resident Income Tax (IRNR)

The Impuesto sobre la Renta de No Residentes (IRNR) is the cornerstone of Spanish taxation for non-resident property owners who receive rental income. The IRNR is a straightforward tax that applies only to income generated from Spanish sources.

Who is Liable?

  • Any individual or entity that rents out property in Spain but is not tax resident there.
  • Non-resident companies that own and rent Spanish property.

Income Subject to IRNR

IRNR covers gross rental income received from Spanish property, irrespective of an owner’s home country or whether the property is rented long- or short-term.

Taxable Period

  • Tax is calculated and declared quarterly (every three months) for rental income.
  • Each quarterly return must be filed by the 20th day of the month following the end of each quarter:
    • Quarter 1 (Jan-Feb-Mar): File by April 20
    • Quarter 2 (Apr-May-Jun): File by July 20
    • Quarter 3 (Jul-Aug-Sep): File by October 20
    • Quarter 4 (Oct-Nov-Dec): File by January 20 of the next year

Deductible Expenses for Non-EU and EU Residents

Deductibility of expenses is where one of the biggest differences lies for non-resident landlords, depending on their country of residence.

For EU/EEA Residents

Residents of an EU/EEA country (e.g., France, Germany, Ireland, Norway, Iceland) are allowed to deduct pro-rated property expenses from their gross rental income. Examples include:

  • Mortgage interest on loans used to purchase the property
  • Local property taxes (IBI)
  • Community fees (if the property is in a communal complex)
  • Insurance premiums
  • Agent/management fees
  • Repairs and maintenance (excluding improvements and renovations)
  • Utility bills paid by the owner
  • Advertising/marketing costs
  • Depreciation (amortization of the building, not the land)

Important: All relevant invoices and receipts must be retained to justify deductions in the event of a tax audit.

For Non-EU/EEA Residents

If you are a tax resident outside the EU or EEA (e.g., USA, UK post-Brexit, Australia, Canada, etc.), you cannot deduct any expenses. The IRNR is calculated solely on gross income.

  • Gross rental income is taxed directly, with no deductions allowed.
  • This can result in a significantly higher effective tax rate.

Tax Rates and Calculation Examples

Tax rates on rental income vary based on your residence:

  • EU/EEA Residents: 19% of net taxable income (after deductions).
  • Non-EU/EEA Residents: 24% of gross income (no deductions).

Some illustrative examples:

Example 1: EU/EEA Resident

Let’s assume you are a French resident and rent your Spanish apartment for €1,200 a month. Your yearly rental income is €14,400. Let’s say your annual qualifying expenses total €4,000.

  • Gross annual income: €14,400
  • Allowable expenses: €4,000
  • Net taxable income: €10,400
  • IRNR (19%): €10,400 x 19% = €1,976

Example 2: Non-EU/EEA Resident

Suppose you are a US citizen and do not reside in the EU/EEA. Your gross rental income from a Spanish property is €14,400 per year. You cannot deduct expenses.

  • Taxable income: €14,400
  • IRNR (24%): €14,400 x 24% = €3,456

Rental Income Distribution Over the Year

If you do not rent the property all year round, you only declare income for the months it was let. For unlet periods, you may owe a separate “deemed income tax,” calculated as a % of the cadastral value, even if not rented (this must also be reported annually on form 210).

Filing Procedures and Deadlines

Non-resident property owners must declare rental income to the Spanish Tax Agency (Agencia Tributaria) using Form 210 (Modelo 210).

Key Points of Filing:

  • Quarterly Filing:
    • Deadline: 20th of April, July, October, or January (for the previous quarter).
    • Lateness incurs penalties and interest.
  • Annual Filing:
    • Required for “deemed income” if the property is not rented for the entire year.
  • Mandatory Electronic Filing:
    • If the owner is a company, all submissions must be electronic.
    • Individuals may file electronically or via paper at tax offices or banks.
  • Bank Account in Spain:
    • Most filings require a Spanish IBAN to pay the tax due.

Filing correctly and on time is the landlord’s direct responsibility—even if you use an agent or rental platform.

Withholding Tax and Paying Tax from Abroad

For most private rentals, non-resident landlords are paid gross, and it is their responsibility to file, declare, and pay taxes directly to the Spanish authorities.

Occasionally, Withholding Might Apply:

  • In rare cases, if a tenant is a Spanish company or professional, it may be obliged to withhold part of the rent (21%) and remit it directly to the tax authorities as advance payment of the non-resident’s tax liability.
  • Most holiday rental platforms do not withhold Spanish tax on behalf of the property owner as of 2024 (always verify platform policies).

For cross-border payments and tax compliance, many non-residents appoint a Spanish tax representative (especially non-EU/EEA residents), but this is not mandatory except for companies.

Reporting Your Rental Income Correctly

Accurate reporting is crucial to avoid audits and fines from Spanish tax authorities. Key reporting requirements include:

  • Identify all relevant periods: Rental income is reported for only the months the property is commercially let. “Deemed income” is reported for any remaining vacant periods.
  • Document all income and expenses: Keep records of rental contracts, income receipts, invoices for all claimed expenses, and bank statements.
  • Use the correct Modelo 210 forms: Multiple returns may be needed if you have several properties or different tenants.

Language and Currency Requirements

  • All documentation submitted must be in Spanish or accompanied by certified translations.
  • Amounts are to be reported in euros (€). Payments in other currencies need to be converted at the official rate for the relevant period.

If you claim deductible expenses as an EU/EEA resident, you may be required to prove your tax residence with a “certificate of tax residence” from your home country tax authority (issued within the calendar year).

Double Taxation Agreements and Relief

Double taxation is a concern when one’s rental income could be taxed both in Spain and in the landlord’s home country. Fortunately, Spain has signed double taxation agreements (DTAs) with most major countries including the UK, France, Germany, USA, Canada, Australia, and others.

General Principles:

  • DTAs typically give Spain primary taxation rights on Spanish-sourced rental income.
  • However, you must still declare this foreign (Spanish) income on your home country tax return.
  • Your home tax authority usually grants a foreign tax credit for tax paid in Spain—so it’s not taxed twice.
  • You must retain proof of payment (e.g., copies of Spanish tax filings and payment receipts).

Practical Example: UK Resident with Spanish Property

A British landlord rents out a flat in Malaga and pays 24% IRNR in Spain. The same rental income is reportable on the UK tax return, but with a credit for the Spanish tax already paid. If the UK tax liability is higher than the Spanish liability, the landlord pays the difference; if it is lower, the Spanish tax prevails and there is no further payment (as of post-Brexit, UK residents cannot deduct Spanish expenses, only gross income is taxed in Spain).

Penalties and Consequences of Non-Compliance

Failure to comply with Spanish tax obligations can result in heavy penalties, back taxes, and even property embargo.

Common Mistakes

  • Not declaring rental income.
  • Declaring incorrect amounts or periods.
  • Incorrect deductions (especially for non-EU/EEA residents).
  • Missing payment deadlines.

Penalties

Penalties for late filing or underreporting can include:

  • Late payment surcharges (rising to 20% for delays over 12 months).
  • Interest on unpaid tax.
  • Fines for failure to file, up to 150% of the due tax in cases of serious fraud.
  • Administrative action, such as seizure of bank accounts or property for repeated or egregious violations.

Spanish tax authorities receive information from local registries, banks, and even rental platforms, making detection of non-compliance increasingly likely in 2024 and beyond.

VAT (IVA) Obligations for Short-Term Rentals

Value Added Tax (VAT or Impuesto sobre el Valor Añadido, IVA) applies differently depending on the rental activity:

  • Long-Term Residential Rentals:
    • Generally exempt from VAT (no IVA charged, no IVA deductibility).
  • Short-Term or Tourist Rentals:
    • If you rent out a property as a “holiday let” and offer hotel-like services (e.g., linen/towel changes, cleaning during stay, meal service), you may need to charge VAT at 10% (standard hotel rate) to tenants.
    • If you only offer a simple rental (no additional services), VAT does not apply.

If liable for VAT, you must register with the Spanish tax authorities, file quarterly VAT returns, and pay any due tax. You can also recover VAT on qualifying expenses for the rental.

Wealth Tax and Property Taxes

Owning property in Spain as a non-resident may trigger an additional set of taxes separate from rental income:

1. Impuesto Sobre Bienes Inmuebles (IBI) — Local Property Tax

  • Annual municipal tax due on all urban properties, based on cadastral value.
  • Payable by whoever owns the property on January 1 each year.
  • Varies significantly by region and property type.

2. Wealth Tax (Impuesto Sobre el Patrimonio)

  • Applies if the total value of your Spanish assets (not just rental income) exceeds national or regional thresholds (generally €700,000 net per person, but lower in Catalonia, for example).
  • Tax rates are progressive, starting at 0.2% up to 3.5% for assets above certain levels.
  • Declared annually using Modelo 714 (even for non-residents, but only on assets sited in Spain).
  • Some principal home exemptions apply for residents, not normally for non-residents.

3. “Imputed” (Deemed) Income Tax

  • If your Spanish property is not always rented, you must pay tax on deemed rental value for vacant periods (usually 1.1% or 2% of the cadastral value, taxed at standard IRNR rates).
  • Declared once a year using Modelo 210 by end of year following the tax year of reference.

Tax Optimization Strategies

Non-resident property owners can manage and sometimes reduce their tax liability through careful planning:

1. Leverage Deductions if Eligible

  • If you are an EU/EEA resident, keep meticulous records and claim all legal deductible expenses to reduce net taxable income.

2. Proper Segregation of Rental Activities

  • Be clear about the nature of your rentals—short-term “tourist” letting may yield higher income but may also face VAT obligations, extra registration, and higher tax scrutiny.

3. Structure Ownership Wisely

  • Explore whether joint ownership (spouse or family co-owners) can take advantage of threshold reliefs, allowances, and possibly lower effective taxation, especially with Wealth Tax.

4. Stay Current With Regional Laws

  • Each Spanish region can have its own tax rules and reliefs regarding property, Wealth Tax, and even rental licensing. Local advice is essential.

5. Consult With Tax Advisors on DTA and Credit Relief

  • Make sure to correctly coordinate the offsetting of Spanish taxes in your home country returns under double taxation agreements.

Seeking Professional Advice

Given the complexity and potentially high costs of non-compliance, it is strongly recommended that non-resident landlords in Spain:

  • Appoint a local tax advisor, gestor, or reputable accountant familiar with non-resident tax law.
  • Arrange for professional annual or quarterly tax filing, especially where multiple properties or rental streams exist.
  • Stay abreast of regional changes in rental legislation, Wealth Tax thresholds, and filing requirements.

Frequently Asked Questions

Do I have to declare rental income even if I make a loss?

Yes. All rental income must be declared. If you reside in an EU/EEA country, you can declare losses (when deductible expenses exceed rental receipts) to offset against future profits for that property.

I’m a UK resident. Can I still deduct expenses post-Brexit?

No. Since the UK’s exit from the EU, HMRC has confirmed Spain does not allow UK tax residents to deduct rental expenses; they are taxed on gross income at 24%.

Are Airbnb and other platform rentals taxed differently?

No. All rental income must be reported, regardless of channel. Only the nature (holiday/short-term vs long-term) and whether you offer hotel-like services may affect VAT status or extra requirements.

How will Spanish authorities know about my rental income?

Spanish tax authorities use cross-checks, including:

  • Information from rental platforms
  • Local property records and bank reports
  • Rental license registrations (many regions now require these for legal rentals)

Do I need a Spanish bank account?

While not strictly mandatory, it is highly recommended for ease of compliance and payment of taxes, especially when using direct debit payment options.

Can I appoint someone else to handle my tax filings?

Yes. Many non-residents use authorized representatives (“representante fiscal”) or expert tax advisers to complete and file Modelo 210 and handle communications with the tax office.

Conclusion

Owning and renting out property in Spain as a non-resident can be highly profitable, but only if you comply rigorously with all applicable tax obligations. Understanding how your residency status affects deductible expenses, applying the correct tax rate, reporting income and expenses fully (using Modelo 210), and coordinating your home country tax position under double taxation treaties are all critical steps.

Given the Spanish authorities’ active efforts to catch tax under-reporting—especially as digital platform and property data reporting improves—there is little margin for error or omission. Work with experienced cross-border tax advisors, keep meticulous records, and stay informed about evolving regulation both at national and regional levels.

Careful, proactive management of your tax affairs will both maximize your return and keep your Spanish property investment enjoyable and trouble-free for the long term.

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