Taxes for Non-Residents Owning Property in Spain: What Foreign Owners Need to Know
One of the most common conversations we have at our law firm is with foreign property owners who discover, often years after buying their Spanish home, that they have tax obligations in Spain that they were never aware of.
Typically, the client is from the United Kingdom, the United States, Canada, or another country outside Spain. They purchased a holiday home, spend a few weeks or months here each year, and perhaps rent it out occasionally. Then, at some point, they learn that owning property in Spain as a non-resident comes with ongoing tax obligations, even if the property is not rented and even if they already pay taxes in their country of residence.
The reality is that taxes for non-residents owning property in Spain are often misunderstood. Many foreign owners assume that if they are not living permanently in Spain or generating income from the property, there is nothing to declare. Unfortunately, that is not the case.
Whether you own a villa on the Costa del Sol, an apartment in Madrid, or a holiday home in Mallorca, Spanish tax rules require non-resident property owners to comply with certain annual obligations.
In this post, we explain the main Spanish property taxes for foreigners, including Non-Resident Income Tax (IRNR), Modelo 210 filing requirements, rental income taxation, local property taxes, and the taxes that apply when selling property in Spain as a non-resident.
What Taxes Do Non-Residents Owning Property in Spain Have to Pay?
The tax obligations applicable to non-resident property owners depend mainly on two factors: whether the property generates rental income and where the owner is tax resident. The second point is particularly important and became even more relevant following Brexit, as UK residents are no longer treated in the same way as EU residents for Spanish tax purposes.
â Non-Resident Income Tax (IRNR): The Tax That Surprises Most Foreign Owners
The Spanish Non-Resident Income Tax (IRNR) is by far the most common tax obligation affecting foreign property owners. It is also the one most frequently overlooked.
This tax must be declared every year, regardless of whether the property generates income.
đ If the Property Is Not Rented Out
Many foreign owners are surprised to learn that even if they never rent out their Spanish property, they may still have a tax obligation.
Spanish tax authorities apply what is known as an “imputed income” system. In simple terms, the Spanish Tax Agency assumes that property ownership provides an economic benefit, even when no actual income is received.
The calculation works as follows:
- 1.1% of the property’s cadastral value (valor catastral) is used if the cadastral value has been revised within the previous ten tax years.
- 2% applies if it has not been revised within that period.
The resulting amount is then taxed at:
- 19% for residents of EU or EEA countries.
- 24% for residents outside the EU/EEA, including the United Kingdom and the United States.
Example: A property with a cadastral value of âŹ150,000 would generate an imputed income of âŹ1,650. A French resident would pay approximately âŹ314 per year. A British or American resident would pay approximately âŹ396 per year.
While these amounts are not usually significant, problems arise when owners fail to file their returns for several years. Interest, surcharges and penalties can quickly accumulate.
The tax is declared using Modelo 210, which must generally be submitted by 31 December of the year following the tax year being declared.
Brexit and Its Impact on UK Property Owners in Spain đŹđ§
One of the most important tax changes affecting British property owners occurred after Brexit. Before 1 January 2021, UK residents benefited from the same tax treatment as EU residents. Since the UK left the European Economic Area framework for these purposes, two important consequences now apply:
- Higher Tax Rate: The applicable tax rate increased from 19% to 24%.
- Loss of Deductible Expenses on Rental Income: UK residents can no longer deduct expenses associated with rental properties in Spain.
As a result, tax is calculated on gross rental income rather than net profit. This remains one of the most common issues we encounter when advising British property owners.
đ If the Property Is Rented Out
If you rent out your Spanish property, whether through long-term rentals, seasonal rentals or holiday lets, the income generated is taxable in Spain. This applies even if you also declare the income in your country of tax residence. Fortunately, double taxation treaties generally prevent the same income from being taxed twice.
- EU and EEA residents: pay 19% tax on net rental income (after deducting allowable expenses such as IBI, local property tax, community fees, insurance, repairs and maintenance, mortgage interest, depreciation).
- Non-EU Residents (residents of countries outside the EU/EEA, including the UK and the USA): pay 24% tax on gross rental income, without deducting expenses.
Example: If your property generates âŹ12,000 per year in rental income, a German resident may pay around âŹ1,900 after allowable deductions. A US or UK resident would pay âŹ2,880, calculated on the full âŹ12,000 of gross income.
Rental income is reported quarterly using Modelo 210.
â IBI and Other Annual Costs of Owning Property in Spain
In addition to IRNR, you also need to take into account the Impuesto sobre Bienes Inmuebles (IBI), which is the local property tax charged by the town hall where the property is located.
For a property with a cadastral value of âŹ150,000, IBI can range between approximately âŹ300 and âŹ900 per year, depending on the municipality. Madrid and Barcelona are usually at the higher end.
You should also factor in the rubbish collection tax, which usually ranges between âŹ50 and âŹ150 per year depending on the location, as well as community fees, which are payable even if the property is empty.
â When the Time Comes to Sell
If you decide to sell the property at some point, there are two tax aspects you should be aware of in advance:
đ The 3% Withholding
The buyer is legally required to withhold 3% of the purchase price stated in the deed and pay it directly to the Spanish Tax Agency. If you sell for âŹ300,000, the buyer will transfer âŹ291,000 to you, while the remaining âŹ9,000 will be paid to the Spanish Tax Agency as a guarantee. If the final tax liability is lower, you can request a refund.
đ Capital Gains Tax
If you sell the property for more than you paid for it, the difference is taxed in Spain at 19%, both for EU and non-EU residents. What changes is access to certain exemptions, which are generally not available to non-residents.
đ PlusvalĂa Municipal
The seller is also responsible for paying the PlusvalĂa Municipal, which is calculated by the local council based on the cadastral value and the number of years that have passed since the purchase.
â The Most Common Mistakes We See
After working with many non-resident property owners, there are some mistakes that come up repeatedly:
- Not filing Modelo 210 because âI donât rent out the property and I donât make any money from itâ. The imputed income rule still applies.
- Allowing several years to go undeclared until the Spanish Tax Agency detects it. Surcharges range from 5% to 20%, plus late-payment interest, and the authorities can generally review up to four previous years.
- Not understanding the impact of Brexit on taxation. Many British clients still declare at 19% when the applicable rate is now 24%.
- Failing to withhold 3% when buying a property from a non-resident, which can make the buyer jointly liable before the Spanish Tax Agency.
- Not reviewing the double taxation treaty between Spain and the country of residence, which in many cases can help reduce or avoid double taxation.
What You Should Know Before Buying, Not After
These obligations are part of the real cost of owning property in Spain. They are not excessive, but they should be taken into account from the beginning.
If you are considering buying a property, you may also be interested in:
đ Can foreigners buy property in Spain without residency?
đ How to buy property in Spain remotely
đ How long does it take to buy property in Spain?
Owning property in Spain as a non-resident means, at the very least, filing Modelo 210 every year and paying IBI. If you rent the property out, you must file quarterly. And when you sell, the withholding and capital gains tax must be handled correctly.
It is not complicated if it is done properly from the start. The problem arises when several years go by without complying with these obligations, that is when the numbers start to hurt.
If you own property in Spain and are unsure whether you are up to date with your tax obligations, contact us and we will review it with you.
