Over the past few years, many property buyers were attracted by the earnings obtained by renting out their property in Spain, especially in cities such as Madrid and Barcelona which offer some of the highest rental yields in Europe.
Although investing in Spanish rental property is often a very profitable investment, investors must take into account the tax on rental income and must declare their earnings, whether they are Resident or Non-Resident in Spain.
In this article, we explain to you the different taxes that Real Estate investors must pay when renting out their properties in Spain, which will mainly depend on their residential status. There are 3 possible scenarios:
1. RESIDENT INCOME TAX: IRPF
If you are Resident in Spain, meaning that you remain in the country for over 183 days during the calendar year, you are subject to the Personal Income Tax known as IRPF.
The IRPF is a direct personal income tax, based on your total earnings including your salary, pensions, and any rental income. The taxable income is the difference between the income earned and the deductible expenses according to Spanish Law.
Therefore, if you are a property owner with Spanish residency, you must declare your rental income via your yearly IRPF income tax return (“IRPF”, “rendimiento de capital inmobiliario”). In this case, EU-residents and EEA-citizens are entitled to the same rates and tax deductions as Spanish citizens.
The IRPF is progressive; meaning that there are different bands depending on how much you earn. It’s important to note that these rates vary between each region in Spain. However, to give you an approximation, below are the income tax bands as set by the Spanish state in 2019:
|Taxable Income||IRPF tax rate|
|Up to 12.450€||19%|
|From 12.450€ to 20.200€||24%|
|From 20.200€ to 35.200€||30%|
|From 35.200€ to 60.000€||37%|
The Residents must declare their rental revenue by filling in the 100 Form as explained in the Tax Agency Website (Agencia Tributaria).
2. NON-RESIDENT INCOME TAX FOR EU/EEA* RESIDENTS: IRNR
If you are a Non-Resident in Spain, (meaning that you stay in Spain for less than 183 days during the calendar year) and own a property there, you must fulfill your fiscal obligations as you are liable to the Spanish Income Tax for Non-Residents known as IRNR.
The Non-Resident Income Tax or IRNR is a direct tax on the income obtained within the Spanish territory by individuals and organizations not residing in Spain.
Non-Residents living in another State of the EU or the EEA* and who rent out their property in Spain have to pay a 19% income tax on the Net yield and not on the Gross rent.
These investors are able to deduct all the expenses of the property, proportionally to the period that the property has been rented.
Some of the expenses that can be deducted:
• Notary fees
• IBI (property tax)
• Garbage service tax
• Property depreciation
• Cost of repair and maintenance
• Neighbor community fee’s
• Interest on loans for the acquisition or improvement of the property, etc
Non-Residents must declare their rental revenue by filling in the 210 Form on the Tax Agency website (Agencia Tributaria).
3. NON-RESIDENT INCOME TAX FOR NON-EU/EEA* RESIDENTS: IRNR
On the other hand, if you are a Non-resident in Spain and you are Not living in another state of the EU or EEA*, you must pay a 24% income tax on the earnings obtained from renting out your property in Spain.
Those Citizens not resident in the EU/EEA cannot apply for any type of tax deduction, and therefore should pay the 24% IRNR-tax on the Gross profit received from renting out their property and not on the Net yield.
Non-Residents must declare their rental revenue by filling in the 210 Form on the Tax Agency website (Agencia Tributaria).* List of EEA member countries:
The European Economic Area (EEA) has 30 member states:
27 EU Member States
Switzerland is not a member of the EU or the EEA. However, since June 1st, 2002, Swiss nationals have the same rights as nationals of EEA countries.
Once you are aware of the different taxes you need to pay if you rent your property in Spain, you can find in this article more useful tips on how to successfully buy a property in Barcelona.
From BARCELO PROPERTY INVEST, we collaborate with local lawyers and tax consultants and can advise you on the best option to purchase your property in Spain.
If you are looking to invest or buy a property in Barcelona as a rental investment, Contact us and we will be happy to present you Our Services and see how we can help you with all the procedures to purchase your property in Spain.