As a property owner in Spain, you pay taxes. First you have the taxes to the town hall, like the ‘IBI‘ and the ‘basura‘. You might also be paying wealth tax if you have more than 700.000 euro net assets in Spain. This article however, discusses the taxes of owning and letting a property in Spain. The ‘impuesto sobre la renta de no residentes‘.
To determine the taxable base of Spanish rental income for residents, we create a distinction between the period during which you did let the property and the period during which you did not let the property.
You letted your property
In the period in which you letted the property you must include all income. So not just rental income, but also the costs you charge the tenant, such as electricity. Up to six months of rent arrears will also be charged as income.
You may deduct costs from the rent if the costs were incurred during the rental period and if the costs were incurred to let the property. Deductible costs include mortgage interest, repair and replacement costs (not renovation costs), municipal taxes such as the IBI, contributions to the community of co-owners/urbanisation, cleaning costs, insurance, publicity and real estate agency costs, property depreciation of 3% per year, moveable depreciation of 10% per year, etc.
You may deduct these costs if they were incurred during the rental period. Thus, you will have to prorate annual fixed costs, for example insurance and IBI. If you rent for 6 months a year, you can only deduct half of the fixed costs.
Rental income less deductible expenses constitutes taxable income. For a Spanish non-resident living in the EU, the rate is 19% on the the taxable income. Otherwise, the rate is 24%.
You did not let your property
If you did not let the property, you are taxed on a cadastral income, the ‘imputación de renta inmobiliaria‘. In doing so, take 2% of the cadastral value as shown on the IBI invoice, or 1.1% of the cadastral value if the cadastral value was revised in the last 10 years. If no cadastral value is available, take 50% of the purchase price.
An example. The cadastral value of your property is €100,000. This value has not been revised in the last 10 years. From this, you take 2%, so the taxable income comes to 2,000 euros. The applicable rate is 19% or 24%, depending on the country of your residence. If you are an EU-resident, the rate is 19% and you pay 380 euro taxes per year.
What if you partially letted your property?
To calculate the total taxable income, take the taxable income from rentals during the rental period and the prorated cadastral income for the period you didn’t let.
The total rental income after expenses should never be less than the cadastral income for one year. So in the example above, the minimum taxable income is 2,000 euros. If you have letted for 6 months, the taxable income for the other non-rented 6 month period is therefore 1,000 euros.
An example. You have rented out your property with a cadastral value of 100,000 euros during the summer months. The total rental period is 50 days. The rental income less deductible expenses is 4,000 euros. The cadastral income comes to 1,726 euros (2,000 euros /365 *315). The total income then comes to 5,726 euros. As you are a resident in France, for example, the rate is 19%. So you pay an amount of 1.087,94 euro.
How do I declare my Spanish taxes for non-residents?
When you don’t let your property, you have an annual tax declaration before 31 december next year, based on the catastral value. If you let your property, you have to declare taxes in each quarter you received rental income. The deadlines are April 20th for income received in the first quarter, July 20th for income received in the second quarter, October 20th for income received in the third quarter and January 20th 20th for income received in the last quarter.
If you received rental income in 2023 in January and August, you have to declare and pay taxes before 20/03/2023 for the first quarter and before 20/10/2023 for the third quarter. You don’t have to submit tax forms for the second and fourth quarter. However, you still have to declare the taxes for the periods without rental income based on the catastral value, before 31/12/2024.
These tax declarations are submitted via the the so-called ‘modelo 210‘ form. Please note that the Spanish government does not invite you to pay taxes. It is your responsibility to declare taxes in due time in order to avoid fines.
Other taxes
As mentioned before, property owners in Spain also pay taxes to the town hall. This are the ‘IBI’ and the ‘basura’ tax and are based on the catastral value of the property and the town hall regulations. You don’t have to prepare a tax declaration for these taxes, as they can be direct debited from your bank account.
Do you have questions regarding a real estate investment in Spain? We remain at your disposal with conveyancing services.
