How rental income is taxed in Spain

If you are a Spanish tax resident, rental income is declared in your personal income tax (IRPF) as income from real estate capital. You are not taxed on what you collect but on the net return: income minus deductible expenses, with possible reductions if you rent to someone as their main home. Knowing the rules changes a flat's real return. (Non-residents follow a different regime.)

You are taxed on the net return: rent accrued minus deductible expenses.
You can deduct property tax (IBI), community fees, insurance, repairs, mortgage interest and 3% depreciation of the building.
Interest plus repairs cannot exceed the year's income; the excess carries forward to later years.
Renting as the tenant's main home allows reductions on the net return, subject to conditions.
An empty property that is not your main home is taxed through deemed income.

What you declare

You declare all rent accrued in the year, whether you collected it or not (with special rules for unpaid rent you have claimed). You subtract deductible expenses to obtain the net return, which is added to your general tax base and taxed at your marginal rate, depending on your total income and your region.

Deductible expenses

Interest on the property's financing and arrangement costs.
Repairs and maintenance: work that keeps the property in condition (not improvements, which are depreciated).
IBI, local charges and community fees.
Insurance on the property.
Services: management, administration, utilities if you pay them.
Depreciation: 3% a year on the higher of acquisition cost or cadastral value, excluding the land. Furniture is depreciated at its own rate.

Worked example

A flat bought for €150,000 plus €15,000 of costs (€165,000), with 60% of the value attributed to the building according to the Catastro. Rent of €800 a month.

Reductions for renting as a main home

If the tenant uses the flat as their main home, the law allows you to reduce the positive net return by a percentage. That percentage depends on the contract date and on conditions that have changed with recent reforms, such as being in a stressed-market area, lowering the rent, renting to young people or having refurbished the property.

Because percentages and requirements can change, check them in the tax guide for the year or with an adviser before calculating your net return.

Holiday and seasonal lets

Seasonal and holiday lets do not qualify for the main-home reduction. Holiday lets with hotel-type services may be taxed as a business activity, with VAT and different obligations. Many regions also require a licence or registration for holiday lets.

If the property is empty

An urban property that is neither your main home nor rented is taxed through deemed income: a percentage of its cadastral value (usually 1.1% or 2%, depending on the cadastral revision) is added to your tax base, in proportion to the days it was empty. Months without a tenant therefore have a tax cost as well as an economic one.

Common mistakes

Not deducting depreciation, usually the biggest expense after interest.
Deducting an improvement (a new kitchen, an extension) as a repair; it must be depreciated.
Forgetting deemed income for empty months.
Applying the main-home reduction to a seasonal let.

Frequently asked questions

Which expenses of a rented flat are deductible in Spain?

Mortgage interest, repairs and maintenance, IBI, community fees, insurance, management and utilities you pay, plus 3% depreciation of the building and depreciation of furniture.

How is depreciation calculated?

3% a year on the higher of acquisition cost (price plus costs and taxes) or cadastral value, excluding the value of the land in both cases.

Am I entitled to a reduction for renting my flat?

If the tenant uses it as their main home, yes, on the positive net return. The percentage depends on the contract date and specific conditions, so check the rules in force.

Does an empty flat pay tax?

Yes, if it is not your main home: a percentage of its cadastral value is imputed as income in proportion to the days it was empty.