Spanish taxation on property rentals: a brief outline 

Warning: The information set out below is a general guideline provided by DOMENECH ABOGADOS. Specific advice should be sought before any action in reliance on it is taken, as explained more fully in this website's legal notice.

Non-resident taxation: income obtained from Spanish rentals by non-resident individuals without a permanent establishment in Spain will be taxed as from 2012 at a 24.75% rate on the gross amount received, although (as with Spanish residents) certain expenses may now be deducted if the owner is an EU resident.  Tax must be paid in relation to each rental payment as it falls due. Alternatively, the taxpayer can choose to group together rental payments received quarterly and pay tax on that basis.

Resident taxation: rental income obtained by individuals resident in Spain will be added to other items of general income and the resulting total taxable base will be subject to applicable Spanish Income Tax rates (for calendar year 2012, these may range from 24.35% to 56%, depending on which Spanish region is relevant). Such income must be declared annually by inclusion in the resident individual’s Spanish Income Tax return.In contrast to non-residents (excluding EU residents), rental income of Spanish property, after deducting the following:

  • interest paid on loans obtained for purchasing the property, as well as repair and conservation expenses;
  • local taxes;
  • payment to third parties for personal services (eg, administrators, porters, etc);
  • legal expenses arising from the formalisation of the rental arrangements;
  • the amount of bad debts, as long as the debtor is legally insolvent and six months have passed from the debt being first claimed;
  • insurance premia covering the property and liabilities which may arise in respect of it;
  • utilities and other supplies;
  • and amortisation.

Further, residents may enjoy tax relief for “income from property” used as dwellings as opposed to commercial premises.

Lastly, but importantly, tax rules differ when the owner obtaining rent is a company or rent is obtained through an organisation undertaking a “qualifying” business activity.

If you have a property in Spain and would like to rent it out, contact Christopher Lee or Margarita Domènech at DOMENECH ABOGADOS.  We can draft the appropriate contract and sort out the resulting tax implications.

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