How to Calculate Your Rental Income Tax as a Non-Resident Property Owner in Spain

If you own property in Spain and are considering renting it out, it’s important to be aware of the tax obligations on the income earned. As a non-resident property owner, you are required to pay taxes on the rental income earned, which must be declared to the Spanish Tax Office (Agencia Tributaria) using Form 210.

Calculating rental income tax can be challenging especially since the rules differ for EU and non-EU residents, and because deductible expenses often need to be prorated according to specific regulations. 

This article provides a comprehensive guide to help you understand how to calculate your rental income tax in Spain, covering everything from income declaration periods to allowable deductions and tax rates. Starting in 2024, the process has shifted from quarterly declarations to an annual filing, simplifying the reporting process but requiring careful attention to detail.

When does rental income have to be declared?

As of 2024, rental income earned from property in Spain by non-resident property owners must be declared annually. This change simplifies the reporting process compared to previous years when declarations were made quarterly. Here are the specifics:

Annual Declaration Period

Starting in 2024, the declaration period for rental income is annual: January 1st to December 31st.

For any rental income earned during a calendar year, you must file your declaration within the first 20 days of January of the following year. For example, for rental income earned in 2024, the declaration must be filed between January 1st and January 20th, 2025.

Previous Quarterly Declaration Periods

Before 2024, rental income declarations were submitted quarterly:

• 1st quarter: January 1 - March 31
• 2nd quarter: April 1 - June 30
• 3rd quarter: July 1 - September 30
• 4th quarter: October 1 - December 31

For example, if you rented your property from February to August in 2023, you would have had to declare the income for the first, second, and third quarters separately.

How to calculate your Rental Income

To accurately calculate your tax liability, several key factors must be considered:

Days the Property was Rented

The number of days your property was rented during the fiscal year affects how certain expenses are deductible. For example, local taxes (IBI, garbage collection fees, etc.) can only be deducted proportionally based on rented days, whereas maintenance and repair costs are fully deductible regardless of the rental period if they are directly related to the earned income. 

Additionally, you must declare imputed income for any days the property was not rented.

Tax Residency Inside or Outside the European Union 

The applicable tax rate depends on the tax residency status:

• 19% for residents of the EU, Norway, Iceland, or Liechtenstein.
• 24% for non-EU residents.

It is also important to note that Non-EU residents are not permitted to deduct expenses from rental income under Spanish tax legislation. As a result, the tax burden for non-EU residents is significantly higher.

Deductible Expenses for EU Residents

If you are an EU resident, you can deduct several types of expenses related to your rental income:

• Mortgage Interest: Interest on loans used to acquire or improve the property.
• Local Taxes and Fees: Such as IBI and garbage collection fees, if paid by the property owner.
• Service Costs: Expenses for cleaning services, rental management, and advertising.
• Maintenance and Repairs: Costs for upkeep such as painting and replacing a boiler.
• Property Depreciation costs: A percentage of the property’s construction value (excluding land) can be deducted annually from the gross rental income.
• Insurance Costs: Home insurance premiums.
• Community Fees and Utility Bills: Includes WiFi, water, and electricity.
• Furniture Depreciation: 10% of the cost of furniture annually over 10 years.

It is important to note that maintenance and repair costs can be fully deducted regardless of the days the property was rented as long as they are directly connected with the rental income. The same applies to expenses related to rental management, advertising, cleaning services, etc. 

In contrast, expenses related to the payment of local taxes, such as IBI, or garbage collection fees, can only be deducted in proportion to the days the property was rented. The same applies to community fees, property depreciation, furniture, appliances, etc. 

If a major renovation increases the property's value, such as changing windows and doors to improve the property's energy efficiency, these expenses can be deducted when the property is sold, increasing the acquisition value to reduce the capital gain. However, they cannot be fully deducted from the rental income earned (only via depreciation).

FInally, although it is not mandatory to send any receipts to the tax office, it is advisable to keep all receipts and documents that justify the deductible expenses. The Tax Office can formally request the receipts within the following 4 years following the deadline.

Property and furniture depreciation

Depreciation is an important aspect of calculating your rental income tax as it allows you to deduct a portion of the cost of the property and its furnishings over time. Here's how you can calculate depreciation for both the property and furniture.

To calculate the depreciation of your property, follow these steps:

1. Obtain necessary values: You'll need the acquisition value, cadastral value, and construction cadastral value of the property. These values are typically found on the IBI receipt and purchase deed.These values, allow to determine what share of the property value can be depreciated.
2. Pro-rate Based on Rental Days: Since expenses must be prorated according to the number of days the property was rented, adjust the annual depreciation amount accordingly.

To calculate the depreciation of furniture and appliances the formula is the same but taking into account that those elements have to be depreciated at 10% annually over the next 10 years.

Case Study

To illustrate how these calculations come together, let's consider a case study: Peter, a tax resident in Belgium, rented his property in Mijas, Malaga for 300 days in the 2024 calendar year. He earned a total of 12.000€ in rental income. 

• Acquisition Value: 120,000€
• Cadastral Value: 100,000€
• Construction Value: 80,000€
• Construction Percentage: 80,000 / 100,000 = 80%

As an EU-resident

• Total Income: 12,000€

During the 2024 fiscal year, he had the following expenses:

• Purchase of a new refrigerator (700€)
  
  • 700 × 10% × 300/365= 57.53€
• Paid the IBI (300€)
  
  • 300 × 300/365= 246.57€
• Repaired the boiler (200€)
• Rental management (450€)
• Community fees (300€)
  
  • 300 × 300/365= 246.57€
• Water, electricity, WiFi bills (1,100€) 
  
  • 1100 × 300/365= 904.11
• Annual Depreciation: 120,000 x 80% x 32,367.12€ % = 2,880€
  
  • 2,880 x 300/365 = 2,367.12€

Total deductible expenses: 4,471.90€ (57.53 + 246.57 + 200 + 450 + 246.57 + 904.11+ 2,367.12)

• Taxable Rental Income: 12,000€ - 4,471.90€ = 7,528.10€
• Tax rate (EU/EEA): 19% 
• Tax liability: 7,528.10 × 19%= 1,430.33€.

If Peter was a non-EU resident, for example tax resident in Switzerland, the tax liability would amount to 2,880€ since the applicable tax rate would be 24% on the income obtained, without the possibility of deducting any expenses. 

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