Income tax in Spain on your rental property

Spain is a wonderful place to own a holiday home, with many people of all nationalities investing in Spanish property. With vibrant culture, outstanding cuisine, and virtually year-round sun, it is no wonder that people are flocking to Spain to secure their Spanish escape. However, as we all know, property comes with responsibility, and income tax in Spain is one of them.

In this article we will go through some relevant information regarding income tax in Spain. However, we would like to remind you that taxes in Spain can be complicated and you could be subject to fines or penalties if you miss a deadline or don’t do your taxes properly. Advisably, you should seek fiscal advice from an expert to avoid possible complications.

Income tax in Spain: What is it?

If you do not live in Spain full time, renting your second home to holidaymakers is a lucrative option. Sometimes these are short term, holiday lets and in other cases, you might choose to rent your second home long-term. For instance, long-term lets are a good option for people with outstanding payments on the property or those who bought as an investment. 

Although it is a great way to capitalise on your initial investment, it does come with obligations; namely, income tax on your rental income. We explain more here.

When do I have to declare my rental income?

Income from rentals in Spain is taxable, whether or not you are a resident in the country. For 2019, rental income tax is 19% for those who are tax resident in a country within the European Union, Norway or Iceland, and 24% for fiscal residents outside these nations. 

When a property is rented out by a non-resident they should declare the rental income in Spain every quarter. These dates are as follows:

• 1st Quarter: January-February-March – Tax payable before 20th April
• 2nd Quarter: April-May-June – Tax payable before 20th July
• 3rd Quarter: July-August-September – Tax payable before 20th October
• 4th Quarter: October-November-December – Tax payable before 20th January

Are there any deductions or allowances?

On the plus side, several expenses associated with renting are tax-deductible if you are a resident of an EU member state, Norway, or Iceland. These include:

• Council tax (IBI)
• Community fees
• Utility charges (if paid by the owner) 
• Home insurance 
• Mortgage interest
• Legal costs
• Cleaning and laundry

What if my country has a double tax treaty with Spain?

Many countries, like the UK, have a double tax treaty with Spain. These agreements ensure that people who, for example, have assets in Spain but live in another country do not have to pay tax twice. Under the terms of the UK treaty, if the property is located in Spain, you would have to declare and pay tax on the income in Spain. Then, when completing your tax declaration in your country of residence, you can show the income but the tax Spanish paid will be deducted against any liability you may have.

What if you are resident in Spain with a second property?

If you are resident in Spain earning rental income from a second home, the scenario is a little more straight forward. Income tax in Spain is calculated annually via your tax declaration. Therefore, you will include your rental earnings along with all your other income on your declaration, which is filed before June each year.

Make the most of this great opportunity

Property to rent in Spain is a remarkable opportunity to earn significant returns on your assets. The rental market is always in demand; people will always need a place to live or stay on holiday. Taking advantage of the demand is a great way to make some money. However, you must make sure that you adhere to all the laws and regulations set by the government.
To help navigate the Spanish tax system, our dedicated advisers are on hand to help every step of the way. Fill out this form and we will offer you a free consultation without obligation.