- Rental Property FAQ

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Q. - As a Property owner in Spain, what taxes am I expected to pay?

This is an important question as many foreign owners of Spanish property are not aware of the tax obligations. The amount of tax you need to pay on your property varies from region to region (each region e.g. Andalucia, has varying rates as set by the respective Juntas,) however they are based on the theoretical rental value of the property in question. These taxes can also be adjusted for inflation from time to time.

The taxes you are expected to pay as a property owner can be broken down into:

  • Local Taxes (IBI and Basura)
  • Personal Taxes (Income Tax etc.)

(Impuesto Sobre Bienes Inmuebles)

The IBI (Impuesto Sobre Bienes Inmuebles) tax is a basic property owners' tax which must be paid annually to your local Town Hall. Your property will have an official value (known in Spain as Valor Catastral) from which the amount of IBI tax due on the property will be calculated. It is advised that as a property owner you ensure this tax is paid every year up to date to avoid any problems that could arise with the Town Hall (the government in Spain, unlike some other European countries, can simply take what they are owed from your bank account without any prior notification.) As previously stated the percentage charge can vary depending on the region of Spain, however in general the IBI rate in Spain is 0.5% to 1%.

Basura y Alcantarillado (Garbage, Drains etc.)

Although you would think that your IBI covers this, it in fact does not and this tax, which is generally around €250 per year, is payable every 3 - 6 months. If your Spanish property also has a garage then there is an additional charge for this access too.

Income Tax

This is an often overlooked but very important tax, as if you are renting out your Spanish property long term then any income you derive from the rental contract is taxable. This tax is known in Spanish as Impuesto de la renta de no residentes, declaración ordinaria (IRNR), and is applicable to non-resident foreign owners of Spanish property who are deriving an income from their rental property. At the time of going to press the rate for this tax is 24% of your declared rental income. Keeping on top of this is extremely important as at these rates a severe backlog and heavy tax penalties can very easily build up over a short period of time.

Many foreign Spanish property owners often complain that there is very little information floating around about their tax obligations under Spanish law, and this can be true, however it will make no difference if you fall behind on your tax obligations. If you own a property in Spain, and you rent out your property and derive a rental income from this (even if you are just paying your mortgage), you are liable to pay tax to your local Town Hall. Keeping on top of this is highly recommended.