Investing in buy-to-let property in Spain can be highly profitable, but taxes can eat into your rental income if you don’t structure your investment efficiently. Understanding deductible expenses, tax rates, and ownership strategies can help maximize profits and minimize your tax bill.
In this guide, we’ll cover practical strategies for reducing rental property taxes, including tax deductions, structuring ownership for tax efficiency, and legal considerations.
1. Understanding Rental Income Tax in Spain
If you rent out a property in Spain, the rental income is taxable, even if you’re a non-resident. However, tax rates and deductions depend on your tax residency status.
1.1 How Much Tax Do You Pay on Rental Income?
| Residency Status | Rental Income Tax Rate | Can You Deduct Expenses? |
|---|---|---|
| EU/EEA Residents | 19% | ✅ Yes |
| Non-EU Residents | 24% | ❌ No |
📌 Key Difference: EU/EEA residents can deduct property-related expenses, reducing their taxable income, while non-EU investors pay tax on gross rental income with no deductions.
1.2 How is Rental Income Tax Calculated?
- If you are from the EU/EEA and earn €20,000 in rental income, but have €5,000 in deductible expenses, you only pay tax on €15,000:
- €15,000 x 19% = €2,850 in taxes.
- If you are from outside the EU and earn €20,000 in rental income, no expenses are deductible, so you pay tax on the full amount:
- €20,000 x 24% = €4,800 in taxes.
💡 Conclusion: EU/EEA residents pay significantly lower taxes on rental income due to allowable deductions.
2. Deductible Expenses: What Can You Write Off?
If you are an EU/EEA resident, you can reduce your taxable income by deducting legitimate property-related expenses.
2.1 List of Deductible Expenses
✅ Mortgage Interest – The interest portion of your mortgage payments is deductible.
✅ Property Repairs & Maintenance – Costs for fixing leaks, repainting, and general maintenance.
✅ Property Management Fees – If you use a real estate agent or rental management company.
✅ Utility Bills – If the tenant does not pay these directly.
✅ Insurance Premiums – Home and landlord insurance costs.
✅ Local Property Taxes (IBI) – The annual municipal tax.
✅ Depreciation – You can deduct a percentage of the property’s value each year as depreciation.
📌 Important: Expenses must be directly related to generating rental income. Costs for personal use of the property are not deductible.
3. Optimizing Your Rental Income Tax Strategy
3.1 Should You Rent Long-Term or Short-Term?
Spain differentiates between long-term residential rentals and short-term tourist rentals, with different tax treatments.
| Rental Type | Tax Rate | Deductions Allowed? |
|---|---|---|
| Long-term rentals (more than 12 months) | 19% (EU) / 24% (Non-EU) | ✅ Yes (EU residents) |
| Short-term tourist rentals | 19% (EU) / 24% (Non-EU) | ✅ Yes (EU residents) |
📌 Key Insight: Long-term rentals may qualify for a 60% tax reduction for Spanish tax residents, but this does not apply to non-residents.
3.2 Should You Buy as an Individual or a Company?
If you own multiple rental properties, buying through a Spanish company (SL) may be more tax-efficient.
| Ownership Structure | Rental Income Tax Rate | Pros & Cons |
|---|---|---|
| Individual | 19%-24% on rental income | ✅ Simpler, ✅ Easier for small investors, ❌ Higher income tax |
| Spanish Company (SL) | 15%-25% corporate tax | ✅ Lower tax rate, ✅ Can deduct more expenses, ❌ More admin work |
📌 Best for large portfolios: If you own multiple properties, structuring your investments under an SL company may be more tax-efficient.
3.3 Use Double Taxation Agreements (DTAs)
Spain has tax treaties with over 90 countries to avoid double taxation. If you live in a country that has a DTA with Spain, you may offset Spanish rental tax against your home country’s taxes.
💡 Example: If you pay 19% tax in Spain but your home country taxes foreign rental income at 25%, you only need to pay the remaining 6% in your country.
📌 Tip: Always check with a tax advisor to see if you can claim tax credits under Spain’s double taxation treaties.
4. How to File and Pay Rental Income Tax in Spain
Non-resident landlords must declare and pay rental income tax every quarter.
4.1 Tax Filing Deadlines
| Rental Period | Tax Payment Deadline |
|---|---|
| January – March | April 20 |
| April – June | July 20 |
| July – September | October 20 |
| October – December | January 20 (next year) |
📌 Late Payments: Missing the deadline results in penalties and interest.
4.2 How to File the Tax Return?
- Use Form 210 (Modelo 210) to declare rental income.
- File online or through a tax representative.
- Pay taxes quarterly via Spanish tax authorities (Agencia Tributaria).
5. Common Tax Mistakes to Avoid
🔴 Failing to Declare Rental Income – Spanish tax authorities actively monitor rental platforms (Airbnb, Booking.com).
🔴 Not Keeping Proper Records – You must keep all receipts and invoices for deductions.
🔴 Missing Quarterly Tax Payments – Non-residents must declare income every quarter, not annually.
📌 Solution: Hire a local tax advisor to ensure full compliance and maximize deductions.
Avoid Overpaying Taxes – Get Expert Tax Planning Advice
Want to Keep More of Your Rental Income? Let’s Optimize Your Tax Strategy!
Many buy-to-let investors in Spain overpay taxes or miss out on legal deductions because they don’t structure their investments correctly.
That’s why we created the Investment Strategy Session—a 1-hour consultation designed to reduce your tax bill and maximize rental profits.