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

  1. Tejada Solicitors
  3. SPANISH PROPERTY SOLICITORS
  5. Renting out a property in Spain as a landlord: laws and taxes

Spain is a very popular country for buying a property to rent out. However, it is important to note that owners of properties with the purpose of tourist stays (short-term) and long-term rentals will be affected by different laws on renting out a property in Spain. These laws and regulations affect various aspects such as the duration of contracts, the minimum conditions required for rental properties, deposits, tax obligations, registration of tourist homes etc.

The first thing to consider when renting out property in Spain is if it will be for a short or long period, since different regulations apply to each of these situations. In Spain, short-term rentals (viviendas de uso turístico) are only allowed for leisure and work purposes. On the other hand, long-term rental contracts are meant for regular use, in which the property acts as a home. The laws on renting a property in Spain differ for these two contracts – long-term rental are subject to the Spanish national laws, however short-term (tourist) rentals are subject to regional legislations. This means that laws on renting a property short-term will vary depending on whether your property is located in Andalusia, Valencia or Asturias.

Laws on renting out property in Spain

Law on long-term rentals

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.

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Law on tourist rentals

For owners who decide to rent out property in Spain for tourist purposes, they will be subject to the rules approved by the autonomous community where the property is located. For properties located in Andalusia that are intended for holiday rental, for example, they must first check that it meets the requirements of the Decree 28/2016. This includes the following: that the property has an occupancy licence, that the rooms have direct ventilation to the outside and a system for darkening the windows, that it has a cooling system by fixed elements in living rooms and bedrooms if rented from May to September and heating if rented from October to April, that it is sufficiently furnished for immediate use, that it has a first aid kit, complaints book, tourist information, information on the operation of electrical appliances, etc.

These are only general guidelines and not definitive statements of the law. All questions about the applications of the law to individual cases should be directed to a Spanish lawyer.

Renting out a property in Spain is an extremely profitable business activity, especially in tourist locations such as Marbella, Malaga, Fuengirola or Nerja. For owners who decide to rent out their property for tourist purposes, they will be affected by the regulations of the autonomous community in which their property is located. For properties located within the region of Andalusia and with the intention of short-term (tourist) rental, the following regulations will apply:

Urban homes for holiday rental in Andalusia

Homes for holiday use are defined as urban housing providing accommodation “in a regular manner and for touristic purposes”. According to Royal Decree 28/2016 of 2nd February, this type of dwelling located in Andalusia must be registered in the Andalusian Tourism Register.

You can find more information about the procedure and requirements on our urban property registration page.

In addition to the Royal Decree above, from 6th March 2019, the Horizontal Property Law limits the holiday letting of all urban properties that form part of a community of owners, with the following terms:

  1. Owners’ associations can limit the number of apartments/properties used for holiday rentals, by the favourable agreement of three-fifths of the total number of owners.
  2. Likewise, the residents’ associations can also agree to increase the special maintenance fees for properties intended to be used as tourist rentals, as long as this increase does not exceed more than 20% of the original fee.
  3. Owners’ associations are unable to prevent the holiday rental of properties if the property was already used as a holiday rental and was already in possession of the corresponding licence before the introduction of this Horizontal Property Law.
Renting out property in Spain, Landlord

Rural homes for holiday rental in Andalusia

On the 12th of May 2016, the new regulation about holiday rentals came into force in Andalusia, for which all rural properties used for tourist rental in the countryside (that are advertised or marketed through channels that include the possibility to reserve accommodation, travel agencies, or companies that mediate or organise tourist services), must be registered with the Andalusian Tourism Registry through rural property registration.

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How much tax will I pay for renting out my property in Spain?

For many years, most landlords renting out a property in Spain would be unaware of their tax obligations, regardless of their residence status. But once new laws for holiday rentals were passed, stricter controls started to be imposed on property owners. As a result, declaring rental income in the right way has become essential for anyone letting out a property in Spain.

Rental income for residents in Spain

As a resident of Spain, you must be taxed in Spain on your worldwide income. Additionally, in accordance with the double taxation agreements signed by Spain, income from assets located abroad will be taxed jointly by Spain and the country of said assets.

In the case of rental incomes coming from the UK, article 6 of the DTA (double taxation agreement) signed between both countries will apply, in which Spanish tax residents are obliged to declare and pay tax on their rental income in the UK and in Spain; to avoid double taxation, the tax paid in England will be deducted in the Spanish resident’s income tax return in accordance with the agreement and domestic regulations.

Under the Spanish tax law, long-term rentals of properties both in Spain and abroad are eligible for a tax allowance of 60% of the net rental income, and a mortgage tax allowance can also be claimed.

It is important to note that income from holiday rentals (short-term) is not eligible for this 60% tax allowance. However, the following are generally some of the deductible expenses; community fees, council tax, insurance, water, electricity, mortgage interest, estate agent’s fees, cleaning and laundry, maintenance, and repair costs.

Rental income for non-residents

  • 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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Tax forms: Declaring taxes from renting out a property in Spain

Owners who rent their houses in Spain are required to declare rental income through Form 100 (Spanish Tax Return – IRPF) or Form 210 (Non-Residents tax) depending on if the owner is a tax resident or not in Spain.

Form 100 is submitted once a year between April 1st to June 30th, whether you are a Spanish tax resident. On the contrary, Form 210 is submitted quarterly for non-residents, within the first 20 days of the month following the end of the quarter.

The Spanish Tax Authority collects taxes on rental income quarterly, on the following dates:

  • First-quarter, 20th April (January, February, March)
  • Second-quarter, 20th July (April, May, June)
  • Third-quarter, 20th October (July, August, September)
  • Fourth-quarter, 20th January (October, November, December)

Form 210 requires the following information:

  • Identify the owner(s) of the property and address.
  • The full address, including the cadastral reference.
  • The period of time for which the property will be rented out, including the number of days each month.
  • Rental price and means of payment, plus expenses for utilities (gas, water, electricity, insurance, IBI property tax, etc.)
  • Moreover, you will have to provide your tax advisor with a copy of the deeds of the house and property tax.
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Tax rates for renting out a property in Spain 2021

The following are the applicable tax rates for 2021:

  • For EU and EEA (Norway, Iceland and Liechtenstein) citizens – 19% tax
  • Rest of the world – 24% tax (Non European members cannot deduct expenses, from 01-01-2021, the United Kingdom is considered a non-member country)
Renting out property, Tax differences between residents and non-residents

Tax discrimination

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.

Renting out property tax discrimination

No 60% reduction for non-EU residents renting long-term accommodation in Spain

Citizens who are residents in Spain for tax purposes who rent long-term properties can apply for a 60% reduction on their tax return. However, for long-term rentals of non-residents, the tax reduction described above does not apply [LIRPF, art. 23.2; LIRNR, art. 24.1]. In response to this situation of discrimination, on 7 March 2019 the European Commission initiated an infringement procedure against Spain (currently in process), considering it discriminatory that this reduction cannot be applied by non-residents.

Rosana Tejada, a tax advisor at Tejada Solicitors, believes that there is great discrimination between EU and non-EU landlords, and that in the not too distant future, thanks to the complaints filed in Brussels and the infringement proceedings that the European Commission has opened against Spain, this type of tax discrimination will come to an end, favouring the investment of buying a property in Spain to rent out.

Long-term rentals in Spain - property transfer tax (ITP)

Even if you are not obliged to pay VAT, there is a type of tax that applies to every rental property in Spain, referred to as the “property transfer tax” (Impuesto de Transmisiones Inmobiliarias). ITP tax must be paid at the beginning of the rental period through Form 600 and it’s the tenant’s duty to pay it. The tax amount is established according to the rental duration and it is relatively low (€7.21 for a two-week rental worth €1,000). ITP for long-term rentals is calculated on a regular 3-year period, which is the legal duration of a standard rental contract in Spain.

VAT for holiday rentals in Spain

A normal apartment in Spain which is rented for short periods is not subject to VAT (Value-Added Tax – IVA in Spanish). VAT only applies when additional services, such as laundry, dining or regular cleaning, typically offered by hotels, are included. In such cases, the rental will need to be previously registered at the tax office (Hacienda) under the category “Alojamientos Turísticos Extrahoteleros” and 10% VAT will have to be included in your invoices.

More information about the VAT for holiday rentals can be found using the following link: Airbnb rental and tax advice in Malaga.

Renting out a property in Spain: Frequently Asked Questions

Yes. In order to successfully rent out your property, you must first decide the type of rental you would like to provide (long-term or short-term). You must abide by the laws that each type of rental requires; for long-term rentals, you must refer to the Spanish national laws and for short-term rentals, you must consult the regional laws in which your property is located.

If you are looking to rent out your property for tourist purposes, you must abide by the specific, regional laws in which your property is located. You will have to register your property which has specific requirements for both urban and rural properties. Many areas in Spain request that you obtain a tourist license prior to letting out your property, through the Tourist Office.

Tax rate differs depending on whether you’re a resident or non-resident of Spain, and the type of rental you provide (short-term or long-term). Spanish residents use their IRPF to declare rental income, where long-term rentals are eligible for 60% reduction. Non-residents that are part of the EU or EEA will be taxed 19% of net income, whilst Non-residents outside of the EU will be taxed 24%.

The requirements for renting out your property in Spain differ depending on the type of rental you wish to provide. You will be subject to national laws or regional laws that cover various aspects such as tax obligations, license and registrations, housing conditions, etc, in order to legally rent out your property.

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