This article is aimed at individuals who reside within the EU and own a property in Spain. We frequently encounter property owners who use their property in Spain themselves for only part of the year and therefore decide to rent it out during the remaining periods in order to generate a better return.

This article provides a general overview of how you can save, on average, more than €500 in Spanish Non-Resident Income Tax without a permanent establishment (Modelo 210). We also answer some frequently asked questions on this subject.

Let us look at an example:

A German resident purchases a property in Spain for €240,000, uses it personally on certain days of the year and rents it out as tourist accommodation for the remainder of the year. As the owner is not resident in Spain and receives rental income, they are generally required to file Form 210 (Modelo 210).

Which expenses are deductible – and which are not?

Due to a lack of awareness or for other reasons, it is often overlooked that Spanish tax legislation provides that non-resident EU citizens without a permanent establishment may deduct expenses that are directly related to their rental income.

Expenses that are not directly related to renting out the property, such as fuel costs, accommodation, meals, etc., are therefore not deductible.
By contrast, expenses such as electricity, water, legal advice, replacement furniture and depreciation are deductible, as they are directly related to the rental income.

However, under current tax practice, not all expenses are 100% deductible. Certain expenses may only be deducted proportionally, depending on the number of days during which the property was actually rented out.

Expenses that are deductible on a proportional basis include, among others: financing costs (e.g. fees and interest), management and supervision costs, insurance, doubtful debts and depreciation.

Repair and maintenance expenses, such as the replacement of furniture or appliances (e.g. a chest of drawers, shelving unit or refrigerator), are, by contrast, fully deductible provided that they merely constitute replacement purchases.

Example calculation of the tax saving: 

As the calculation above shows, the rental income amounts to €3,000, while the deductible expenses (after applying the 88% proportion) amount to €1,276.
The resulting taxable income is therefore €1,724, to which a tax rate of 19% (for EU citizens) is applied.
The tax payable to the Spanish Tax Agency (Agencia Tributaria) therefore amounts to €327.56.

Had these expenses not been claimed, the amount of tax payable would have been considerably higher.

 

What happens on the days when the property is not rented out?

For the days on which the property is not rented out but is used personally by the owner, imputed income (imputación de renta) must be declared.
This calculation applies exclusively to the days on which the property is used by the owner.

For this purpose, Form 210 (Modelo 210) must be filed again in the following year.
Further information on this subject can be found in our article on imputed income for non-resident taxpayers.

Our law firm will be pleased to assist you in analysing your individual circumstances, handling the necessary administrative procedures on your behalf and preparing and filing the corresponding tax returns. Should you be interested in our services or have any specific questions regarding this matter, please feel free to contact us by email or telephone.

Author: 

María Santos
Lawyer
CEO, Partner, Legal Director
info@sspartners.es
Tel: (+34) 951 12 13 06
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