Rental income tax in Spain for non-residents: EU vs non-EU rates explained 2026
At a glance
Non-residents who rent out Spanish property must declare the rental income annually under the Impuesto sobre la Renta de No Residentes (IRNR) and pay tax on it in Spain. The rate and the deductibility of expenses depend critically on whether the owner is resident in the EU or EEA, or outside it — a distinction that has become more significant for UK owners since Brexit, and that is currently at the centre of a legal dispute that has not yet been resolved.
This guide covers the full picture: the EU vs non-EU treatment, which expenses can be deducted and which cannot, the repair vs improvement distinction that generates more disputes with Hacienda than almost any other element of the rental tax calculation, the rules for mixed-use properties, tourist rentals and the VAT risk that many owners overlook.
EU vs non-EU: the fundamental distinction
EU and EEA residents: 19% on net income
Residents of EU and EEA countries pay rental income tax at 19% on their net rental income — that is, gross rents received minus deductible expenses. The ability to deduct expenses is the key advantage of EU/EEA status: in a well-managed rental with a mortgage and ongoing costs, the net income base can be significantly lower than the gross income received, resulting in a materially lower tax bill.
The annual filing deadline for rental income is 31 January of the year following the tax year. The return is filed using Modelo 210.
Non-EU residents: 24% on gross income — and the legal controversy
Non-EU residents — including UK owners post-Brexit — have historically been taxed at 24% on gross rental income, with no expense deductions permitted. This treatment is significantly less favourable than the EU rate, both because of the higher headline rate and because the gross income base cannot be reduced by the costs of ownership.
In July 2025, Spain’s Audiencia Nacional ruled that this discriminatory treatment of non-EU residents violated the free movement of capital provisions of the Treaty on the Functioning of the European Union (TFEU). The AEAT has appealed to the Tribunal Supremo, and the outcome is genuinely uncertain — a standstill clause in the TFEU may permit Spain to maintain the discrimination, since it predates 1993. The Tribunal Supremo may also refer the question to the Court of Justice of the EU (TJUE) before deciding, which would extend the timeline further.
The practical position for non-EU owners in the meantime is constrained by the mechanics of the filing system: Modelo 210, as currently configured, does not permit non-EU residents to enter expense deductions. The only route available is to file on the standard gross income basis and then submit a separate refund claim — which Hacienda will decline while the appeal is pending. That claim may only be settled if and when the Tribunal Supremo or TJUE rules in favour of non-EU owners.
The Audiencia Nacional ruled in July 2025 that the 24% gross income treatment of non-EU non-residents violates EU law. The AEAT has appealed to the Tribunal Supremo, which may refer to the TJUE. The outcome is uncertain. Non-EU owners should continue filing at 24% gross income — the form does not permit deductions — but may wish to preserve their position by submitting a refund claim, taking specific advice on the current legal position before doing so.
A worked example: EU vs non-EU on the same property
Same property, same rental income — different treatment
Spanish property generating €12,000 annual rent. Annual expenses: €3,000 mortgage interest, €900 IBI, €600 insurance, €1,200 management fees, €800 depreciation. Total deductible expenses: €6,500.
EU/EEA owner
Non-EU owner (current)
The difference in this example is €1,835 per year — on the same property, the same income and the same costs. Multiplied over years of ownership, the cumulative impact is significant.
Calculate your rental income tax
Free calculator — EU/EEA with expense deductions and non-EU gross income compared.
Deductible expenses for EU non-residents
The following expenses are deductible against rental income for EU and EEA residents. Each must be properly documented with invoices or receipts in the owner’s name, and must relate to the period the property was actually rented.
| Expense | EU/EEA deductible? | Notes |
|---|---|---|
| Mortgage interest (acquisition loan) | Limited | Interest on the loan used to acquire the property is deductible. Capital repayments are not. Financial costs — interest and similar charges — may be subject to a limit when combined with other financial expenses. Only the interest element qualifies, not arrangement fees or insurance tied to the loan. |
| IBI (council tax) | Yes | Annual IBI proportionate to the rental period |
| Home insurance | Yes | Property insurance premium proportionate to the rental period |
| Community fees | Yes | Homeowners’ community charges during the rental period |
| Property management fees | Yes | Agent commission, administration fees — must be properly invoiced |
| Repairs and maintenance | Limited | Deductible but subject to limits — see repair vs improvement section below. Repairs restore; improvements add value. The distinction matters and is closely scrutinised. |
| Utilities (owner-paid) | Yes | Only if paid by the owner, not the tenant |
| Depreciation (amortisation) | Yes | 3% per year of the higher of the cadastral value or the acquisition cost of the building (not the land). Important: amortisation claimed reduces the acquisition cost at the point of sale — see CGT guide. |
| Legal and professional fees | Yes | For rental-related legal advice or tax compliance — not for the original purchase |
| Capital improvements | No | Not deductible against rental income — added to acquisition cost for CGT purposes instead |
The repair vs improvement trap: Hacienda’s double standard
The distinction between repairs and improvements is one of the most litigated areas of Spanish property tax — and its treatment in the rental context has a specific characteristic that is rarely explained clearly.
In principle, the rule is straightforward: repairs and maintenance — works that restore the property to its previous condition or maintain its current state — are deductible against rental income. Capital improvements — works that increase the value, extend the useful life or materially alter the property — are not deductible against rental income, but are instead added to the acquisition cost for capital gains tax purposes.
The problem arises in the grey area — works that could plausibly be classified as either. And here, a pattern emerges in how the AEAT approaches borderline cases that is worth understanding explicitly:
In the CGT context — when a property is sold and the owner is trying to include works costs in the acquisition cost to reduce the gain — Hacienda tends to classify borderline works as repairs, arguing they do not qualify as improvements. This prevents them from being added to the acquisition cost and keeps the taxable gain higher.
In the rental income context — when the owner is trying to deduct works costs as expenses to reduce rental income tax — Hacienda tends to classify the same borderline works as improvements, arguing they are capital in nature. This prevents them from being deducted against income and keeps the taxable income higher.
The same works, the same facts, the same grey area — but classified differently depending on which classification is more favourable to Hacienda. This is not a theoretical risk: it is a documented pattern in AEAT assessments and administrative and judicial decisions. The practical consequence is that owners who attempt to claim borderline works in both directions — as a rental deduction and as a CGT cost — are likely to have at least one of those claims challenged successfully.
In the CGT context, borderline works tend to be classified as repairs — preventing them from increasing the acquisition cost. In the rental context, the same works tend to be classified as improvements — preventing them from being deducted. Owners attempting to claim borderline costs in both directions should be aware that Hacienda is likely to challenge at least one classification. Proper documentation and a defensible classification from the outset are essential.
Mixed use: rented for part of the year
Many non-residents use their Spanish property personally for part of the year and rent it out for the remainder. In this situation, two separate tax obligations apply:
- Rental income tax (Modelo 210) for the months the property was rented — declared at the applicable IRNR rate on the income received, with expenses deductible proportionate to the rental period for EU/EEA owners
- Imputed income tax (renta imputada) via Modelo 210 for the months the property was not rented and was available for personal use — calculated at 1.1% or 2% of the cadastral value, proportionate to the unrented period
Both obligations run concurrently for the same year. Expenses can only be deducted in proportion to the rental period — a property rented for six months can deduct half of annual fixed costs such as insurance and IBI against the rental income, not the full year.
Tourist rentals: income tax and the VAT risk
Holiday and tourist rentals — properties let through platforms such as Airbnb, Booking.com or similar for short stays — are subject to the same IRNR framework as long-term rentals for the income tax element. The rate, deductibility of expenses and filing obligations are the same.
However, tourist rentals carry an additional risk that does not apply to standard long-term lettings: the potential obligation to charge and remit IVA (VAT). The distinction hinges on whether the rental is a pure property letting or whether it involves the provision of services to guests.
A bare rental — making the property available for occupation with no additional services — does not trigger IVA. But where the owner or a manager provides services that go beyond passive property rental — such as regular cleaning during the stay, linen changes, concierge or welcome services, or hotel-like amenities — the activity may be reclassified as a services business rather than a property rental. If so, IVA at 10% applies to the rental charges, quarterly VAT returns must be filed, and the compliance burden increases significantly.
The threshold between a passive rental and a services activity is not always clear. Cleaning between guests at the start and end of a stay is generally accepted as normal landlord activity and does not trigger IVA. Regular cleaning during a guest’s stay, or the provision of linen changes on request, is more likely to be considered a service. The assessment is made on the totality of what is provided, and borderline cases require careful analysis — particularly for owners using management companies that bundle services as part of their offering.
If your holiday rental includes services provided during the guest’s stay — beyond simply making the property available — the activity may be subject to IVA at 10% on top of income tax. If IVA applies, quarterly VAT returns must be filed and the income tax treatment also changes. Owners using management companies should confirm exactly what services are included in their management agreement and whether those services trigger an IVA obligation.
Filing and deadlines
Rental income for non-residents is declared using Modelo 210. The annual filing deadline is 31 January of the year following the tax year — so rental income for 2025 must be declared by 31 January 2026.
Each property is declared separately. If a property is owned jointly by two non-residents, each co-owner must file their own return for their proportionate share of the income and expenses.
Late filing triggers automatic surcharges: 1% rising 1% per month to a maximum of 15% after twelve months if filed voluntarily, or 20% plus interest if filed after Hacienda has initiated enforcement proceedings. Voluntary regularisation of missed filings is significantly less costly than waiting for Hacienda to act.
Frequently asked questions
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