What deductions can I take as an owner of rental property in Spain?
March 21, 2023
Non-resident property owners who earn rental income from their property in Spain must file a tax return in Spain, regardless of how that income is taxed in their home country. The Spanish Tax Agency (Agencia Tributaria) requires the submission of Form 210, the tax return for non-residents’ income tax.
Until 2023, rental income had to be declared quarterly, with deadlines on 20 April, 20 July, 20 October, and 20 January (of the following year), each covering the previous quarter.
However, starting from the 2024 tax year, the declaration of rental income will shift to an annual basis, with a single filing period between 1 and 20 January of the following year.
Who can deduct expenses?
Through Form 210, non-residents report both their rental income and eligible expenses. But not everyone can deduct costs.
Only tax residents of EU countries, Iceland, Norway, and Liechtenstein are entitled to offset expenses against their rental income.
Non-residents from other countries (such as the UK, the U.S., or Switzerland) must declare their gross rental income and are not allowed to deduct expenses.
That said, this distinction may soon change. A recent ruling by the Spanish National Court has challenged the unequal treatment between EU and non-EU property owners, opening the door for potential future alignment of tax rights. While no official change has yet been implemented, the decision represents an important legal development to watch.
Deductible expenses for eligible taxpayers
If you qualify to deduct costs (EU, Iceland, Norway, or Liechtenstein), the following eight categories of expenses can be claimed:
- Property-related expenses: local property taxes (IBI or rubbish collection fee), community fees, or house insurance premiums.
- Utility bills: Expenses related to water, gas, electricity, and other utilities can also be deducted from rental income if the property owner bears them.
- Maintenance costs: Costs incurred to maintain the property, including repairs and cleaning, can also be deducted. In this regard, it has to be noted that the purchase of furniture can only be deducted via depreciation at the rate of 10% per annum (2.5% per quarter).
- Mortgage interest: Non-residents who have a mortgage on the Spanish property are allowed to deduct the interest paid on their mortgage from their rental income.
- Property management fees: If a non-resident hires a property management company to manage the property, the fees paid to the company can be deducted.
- Advertising and marketing expenses: Costs incurred to advertise and market the property to potential tenants can also be deducted.
- Legal and accounting fees: Fees paid to legal and accounting professionals to assist with the rental of the property can be deducted.
- Depreciation: Non-residents are allowed to deduct the depreciation of the property over time. The depreciation cost for rental property is calculated as 3% of the greater of the purchase price or the cadastral value of the property. In both cases excluding the plot value.
Proportional deductions and record keeping
Many expenses can only be deducted proportionally based on the number of days the property was rented out.
For example, if your property was rented for 120 days in the year, you can only claim 120/365 of the annual property tax, community fees, utilities, or depreciation costs.
Keeping accurate records of your rental income, expenses, and rental periods is essential to ensure the correct calculation of deductible expenses.
Avoiding double taxation
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