IRNR: Non-Resident Rental Tax Guide and Key Deductions in Spain

The Tax and Who is Obligated

The dream of owning a property in Spain often comes with the opportunity to generate income through rental. However, managing the tax on this income can turn into a nightmare if you are unfamiliar with the specific regulations. This article is designed to resolve that uncertainty.

What is the Non-Resident Income Tax (IRNR)?

It is a direct tax levied on income obtained in Spanish territory by individuals or entities that do not have their tax residency in Spain. If you own property in Spain and rent it out, the income you receive is subject to the IRNR.

Who is obligated to pay?

You are considered a Non-Resident for tax purposes and, therefore, obligated to declare the IRNR if you do not meet Spain’s residency conditions, the main one being not having stayed more than 183 days (six months) in Spanish territory during the calendar year.

If you obtain any income derived from the rental of your home in Spain (whether tourist or long-term), you must declare it to the Spanish Tax Agency (AEAT) using Form 210 (Modelo 210). The problem we solve is ensuring you know exactly how to correctly declare your rental income to avoid penalties, maximizing your tax savings.

Tax Base: Income and Deductible Expenses

The tax base of the IRNR for rental is determined by your tax residency inside or outside the European Union (EU) or the European Economic Area (EEA). This distinction is crucial for determining what can be deducted.

Income taken into account (Gross Income): Gross income includes all amounts received from the tenant, including the rental amount itself, and any other accessory income (such as the cost of services borne by the landlord).

Deductible Expenses: The Key to Minimizing Your Tax Burden

1. Residents in the EU, Iceland, and Norway: Taxpayers residing in these countries have the right to deduct expenses necessary to obtain rental income, provided they are direct and properly justified.
2. Non-EEA Residents (Outside the EU/EEA): Historically, these taxpayers could not deduct any expenses, paying tax on the gross income. However, thanks to recent rulings by the National Court (Audiencia Nacional), the door has been opened for non-EEA residents to also apply the same deductions as EU residents. This judicial doctrine seeks to avoid discrimination and is aligned with the principle of free movement of capital, allowing claims for rental expenses.

Main Deductible Expenses (if applicable by residency):

• Loan Interest: Interest and other financing expenses for loans used for the acquisition or improvement of the property.
• Taxes and Fees: Real Estate Tax (IBI) and municipal fees (garbage, sewage, etc.).
• Conservation and Repair Expenses: Costs of maintenance and repair of the property (excluding improvements or extensions).
• Community Fees: Fees paid to the homeowners’ association (Community of Owners).
• Utilities: Costs of electricity, water, gas, and internet, provided they are paid by the owner and not passed on to the tenant.
• Property Amortization: Deduction is allowed for the depreciation of the property and movable assets (furniture and appliances) at a legally established percentage.

Important: Expenses are only deductible for the effective period the property was dedicated to rental.

Tax Calculation and Percentage

The calculation of the IRNR is straightforward once the tax base is determined.

Tax Liability=(Gross Income−Deductible Expenses)×Tax Rate

Applicable Tax Rates for Rental Income

Percentages vary strictly based on the taxpayer’s country of residence:

It is essential to apply the correct rate and, if not residing in the EU/EEA, to rely on proper documentation to exercise your right to deduct rental expenses.

Common Errors to Avoid

Lack of knowledge is the main cause of errors that lead the Tax Administration to impose penalties. An authority article must prevent you from making these mistakes:

1. Failure to Declare Imputed Income (Owner’s Use): If your property is only rented for part of the year, the remaining days when it is vacant and at your disposal must be declared as Imputed Real Estate Income (a presumed income) on the same Form 210, applying a percentage (generally 1.1% or 2% of the cadastral value) to those days. Omitting this declaration is a serious tax error.
2. Confusing Deductible and Non-Deductible Expenses: Attempting to deduct expenses that are not directly related to the rental activity (e.g., personal travel) or doing so without the proper invoices and supporting documentation. All documents must be ready for an inspection.
3. Late Filing: Late filing, even if the result is zero or payable, entails surcharges ranging from 5% to 20% of the amount due, plus late payment interest.
4. Failure to File a Declaration for Each Owner: If the property belongs to several co-owners (e.g., a married couple), each person must file their own Form 210, declaring only the percentage of the rental income and expenses corresponding to their ownership share.
5. Failure to Consider Double Taxation Treaties (DTT): Spain has agreements with many countries to prevent you from paying twice for the same income. Failure to consider whether a DTT applies to your situation can result in excessive tax payment.

Process and Deadlines for Filing (Form 210)

The declaration of rental income is made by filing Form 210 with the Tax Agency.

Key Changes to Deadlines:

Since the 2024 tax year, income derived from property rental has switched from quarterly filing to annual filing. This simplification allows all rental income generated throughout the calendar year to be grouped into a single declaration.

• Annual Filing Deadline: The deadline for filing the Form 210 self-assessment for rental income (Type of income 01 or similar) is from January 1 to December 31 of the year following the income accrual. For example, income generated in year X is declared in year X+1.
• Method of Filing: Form 210 must be filed electronically (through the AEAT’s Electronic Headquarters). For many non-residents, management through a fiscal representative is the safest and most efficient method to ensure compliance.

It is essential that when managing your property rental, you keep all income and expense records organized to facilitate the annual self-assessment.