Property ownership by non-residents in Spain is subject to both Property Tax (IBI) and Non-Resident Income Tax (IRNR). If your tax residence is outside Spain, both rental income and the so-called deemed income from property ownership (imputación de rentas inmobiliarias) must be declared and taxed under the Spanish Non-Resident Income Tax regime.

To ensure that your second home does not become your tax residence, we recommend reading our article: The Tax Trap of Owning a Second Home in Spain

With regard to property ownership by non-residents, there are three possible situations:

1. You use your property exclusively as a second home for your own personal use.
2. You rent out your property throughout the entire year.
3. You rent out your property for only part of the year.

1. Personal use of the property as a second home

If you use your property exclusively for your own personal use and it is not your main residence, you must declare it each year in your Non-Resident Income Tax Return (IRNR) under the deemed income rules applicable to real estate.

As a general rule, this deemed income amounts to 1.1% or 2% of the property's cadastral value, since Spanish tax law considers property ownership itself to generate taxable income. This deemed income is then subject to Non-Resident Income Tax at the applicable rate, currently 19% for tax residents of the EU, EEA or certain treaty countries, and 24% for other non-residents.

Please note that this tax is payable in addition to the annual Property Tax (IBI). Furthermore, as a non-resident property owner in Spain, you are legally required to file an annual Non-Resident Income Tax Return.

2. Renting out the property throughout the year

If you rent out your property throughout the year, the rental income must be declared under the Spanish Non-Resident Income Tax (IRNR) as income from real estate. If your tax residence is in Germany or another EU Member State, you have been entitled since 2014 to deduct all expenses directly related to generating the rental income, which in most cases significantly reduces the amount of tax payable.

The general tax rate is 19% on the net rental income for EU and EEA residents. Thanks to the Double Taxation Agreement between Germany and Spain, the tax paid in Spain may, where applicable, be credited against the income tax payable in Germany.

Please note that in the case of rental income, a calculation of taxable profit must be prepared and the resulting profit declared by filing Form 210 (Modelo 210), where it is taxed at either 19% or 24%, depending on the taxpayer's country of tax residence.
Particularly in the case of holiday rental properties, obtaining professional tax advice beforehand is strongly recommended.

 

3. Partial rental and personal use of the property as a second home

If you rent out your property for only part of the year, it will either remain vacant or be used by you personally during the rest of the year. In both cases, that period is treated as personal use and is therefore subject to deemed income taxation. For example, if the property has been rented out for half of the year, you may deduct the corresponding proportion of deductible expenses from the rental income, while for the remaining six months you must declare and pay tax on 50% of the deemed income (imputación de rentas). In this situation, two separate tax returns must be filed: one for the rental income after calculating the annual taxable profit at the beginning of the following year, and another for the period during which the property was used personally.

Our law firm will be pleased to analyse your specific situation, handle the necessary administrative procedures on your behalf and prepare and file the corresponding Spanish tax returns. If you require further information or personalised advice, please do not hesitate to contact us by email or telephone. You can find information about our services in the Non-Residents section.

Author:

Christoph Sander
Lawyer and Tax Advisor
CEO, Partner, Director
info@sspartners.es
Tel: (+34) 951 12 13 06
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