Renting out a property in Spain as a landlord: laws and taxes

The law regulating long-term rentals in Spain refers to the rental of a property whose purpose is to satisfy the permanent housing needs of the tenant.

Following the latest amendment in March 2019 to the laws on renting out property in Spain, the minimum duration of a rental contract is five years if it is a lease between individuals, or seven years if the lessor is a legal entity. After this period, the rental contract can be extended for a further three years if neither of the parties waives the extension.

Once this period has passed, tenants who do not wish to continue with the contract only have to give the landlord one month’s notice before the termination date. The landlord must give 4 months’ notice. If, for any reason, the tenant wishes to terminate their lease, they may withdraw from a rental contract after at least six months have passed on the initial contract, provided that the landlord is notified at least thirty days in advance. On the other hand, the lessor may not repossess the dwelling until the first year of the contract has elapsed, and provided that the lessor informs the lessee that they need the rented dwelling to use it as a permanent dwelling for themselves or their family members.

As a resident of Spain, you are subject to taxation on your global income. Moreover, pursuant to the double taxation agreements established by Spain, income derived from assets located abroad is subject to joint taxation by both Spain and the country where those assets are situated.

Regarding rental income from the UK, the provisions of Article 6 in the Double Taxation Agreement (DTA) between the two countries come into play. Spanish tax residents must declare and pay taxes on their rental income in the UK and Spain. To prevent double taxation, the tax paid in the UK can be offset in the Spanish resident’s income tax return following the terms outlined in the agreement and domestic regulations.

Regarding the double taxation agreements applicable to individuals who move to Spain from Canada, as well as from the USA, as well as Spain and the USA, such types of income are also regulated in Article 6. Similarly, the tax paid in the country of the income source will be deducted in the country of residence, in this case, Spain.

As a tax resident in Spain, if you receive income from the rental of real estate located in Spain or abroad, you may be eligible for tax deductions. If you wish to learn more about these deductions, please click here.

According to Spanish tax legislation, long-term property rentals in Spain and abroad may qualify for a tax deduction. Some common deductible expenses include community fees, municipal taxes, insurance, water, electricity, mortgage interest, real estate agent fees, cleaning and laundry, as well as maintenance and repair costs.

Regarding the applicable percentage for the tax deduction for rental housing, it is detailed as follows:

– For rental agreements formalized before January 1, 2024, a 60% reduction on net rental income can be applied.

– For agreements formalized from January 1, 2024, the reduction will be 50%.

– For homes located in tensioned areas regulated by the new housing law (this concept will be determined by the autonomous community where the property is located) for rental agreements entered into from January 1, 2024:

· 90% reduction when the rent is reduced by at least 5% compared to the previous contract.
· 70% reduction if the home is rented for the first time and the tenant is between 18 and 35 years old.
· 60% reduction if the home has been rehabilitated in the two previous years.

• Non-resident Europeans: Despite living abroad, any Europeans renting out a property in Spain have to pay foreign tax, known as IRNR (Impuesto sobre la Renta de No Residentes). In accordance with 24.6 LIRNR (Real Decreto Legislativo 5/2004, 5th of March), property owners need to pay the net rent – that is, the income minus expenses. These expenses can only be deducted if you can provide a certificate of fiscal residence in your home country. Some of these expenses are the following; property tax (IBI), home insurance, value depreciation of the house, community expenses, legal defense (lawyer), mortgage interests, maintenance and publicity expenses. You can only deduct the proportional part of the expenses corresponding to the number of days the property has been rented for.
• Non-residents outside of EU: In accordance with 24.1 LIRNR, citizens who are residents in non-EU countries or EEA (Norway, Iceland and Liechtenstein) who obtain rental income in Spain (this particular tax rule does not distinguish between long-term and short-term rentals) must be taxed on their gross income obtained by rentals – that is, you cannot deduct any expenses. Non-EU, non-residents must pay full tax – no deductions, where neither allowances possible.

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Deductions on rental expenses are not allowed for citizens residing outside the EU or EEA (Norway, Iceland and Liechtenstein). From 01-01-2021, the United Kingdom is considered a non-member country and as an important new thing to be taken into account, non-resident British citizens in Spain that obtain incomes from renting their homes in Spanish territory will have to pay a tax of 24%. Furthermore, as non-European community citizens, they will also not be able to deduct their rental expenses, and will therefore pay taxes for the gross income.

As a result of this tax discrimination, many taxpayers affected have filed multiples complaints with Brussels over this increased taxation rate. Below shows a table comparing the difference in taxation for EU citizens and non-EU citizens: A UK citizen owns a property in Malaga which he rents for 1,250 euros per month. The expenses incurred during the year (electricity, water, repairs, community fees, IBI, etc.) are 2,800 euros.

A recent landmark court ruling, SAN 3630/2025, has opened the possibility for non-EU residents to deduct certain property-related expenses. However, this judgment is not yet final. Tejada Solicitors therefore advises a cautious approach, as until the Spanish Supreme Court issues a definitive ruling, the Spanish Tax Agency may continue to deny such deductions and impose penalties for non-compliance.

As a result, non-EU property owners currently face two possible approaches. The first is a conservative option, filing the tax return at the 24 percent rate on gross rental income and subsequently submitting a refund claim should the legal position be clarified in favour of deductions. The second option is to apply deductions directly when filing, a strategy that carries a higher risk of complementary tax assessments, interest, and potential penalties.