Taxation of real property in Spain: everything you need to know

Individuals who are non-residents in Spain and own property in Spain are required to pay certain taxes to the Spanish Tax Authorities

1. Unrented Property Taxation

If the property is at the owner’s disposal, meaning it is not rented, the non-resident must pay tax on so-called “presumed” or “imputed income.”

The taxable base is calculated by applying 1.1% of the cadastral value of the property, or 2% if the cadastral value has not been revised.

The applicable tax rate depends on where the non-resident resides:

1. Non-residents living in an EU country are taxed at 19% of the taxable base.

1. Non-residents living in a non-EU country (for example, the United States or Canada) are taxed at 24% of the taxable base.

If the taxpayer did not own the property for the entire year, or if the property was rented for part of the year, the imputed income is reduced proportionally to the number of days the property was available for personal use.

This imputed income applies to urban properties and rustic buildings not used for economic activity. It does not apply to land, plots, or buildings under construction.

The deadline to declare and pay this tax is the entire calendar year following the tax year. For example, imputed income for 2025 must be declared by December 31, 2026.

However, we recommend filing all tax forms related to property ownership in January of the following year, together with the filings for rented properties.

2. Taxation of rented properties in Spain

Non-resident individuals who rent out property in Spain are required to pay tax on the income generated in Spain.

The tax treatment depends on the country of residence:

1. a) Non-residents living in an EU country are taxed at 19% of net income. This means they may deduct expenses directly related to the rental, such as maintenance, mortgage interest, insurance, and depreciation.
2. b) Non-residents living in a non-EU country (for example, the United States or Canada) are taxed at 24% of gross income, with no deduction of expenses.

In July 2025, Spain’s National Court (Audiencia Nacional) recognized, for the first time, the right of non-EU taxpayers to deduct rental expenses, aligning them with EU taxpayers. The Court ruled that Spain’s restriction on deductions for non-EU residents violates EU law.

This ruling opens the door for many non-EU property owners to seek refunds of overpaid taxes. At present, taxpayers may:

1. Deduct all expenses directly related to their Spanish rental income.
2. File correction requests (rectificación de autoliquidación) for tax returns filed within the last four years.

However, the State Attorney has appealed the ruling to the Spanish Supreme Court, which may refer the case to the Court of Justice of the European Union for a final decision.

Our recommendation for non-EU property owners:

1. Review prior filings to determine whether deductible expenses were excluded.
2. Submit correction requests for eligible years, especially as the four-year statute of limitations approaches.
3. For new filings, consider declaring income on a gross basis and filing a correction later, pending final confirmation from higher courts.

Our law firm can assist you throughout this process to recover overpaid taxes and ensure compliance with the latest legal developments.

Please note that if the property was rented for only part of the year, two types of income must be declared: rental income and imputed income for the period the property was used by the owner.

3. Ownership of the property

Property ownership also triggers additional taxes:

• Property Tax (IBI): Known in Spanish as Impuesto sobre Bienes Inmuebles but everyone calls it IBI, this is an annual municipal tax issued by the local city hall. The amount depends on the property’s characteristics and location. We strongly recommend setting up direct debit payments to avoid penalties.
• Wealth Tax: If the value of the property exceeds the applicable exemption threshold in the relevant region, the non-resident may be required to file a Wealth Tax return each year. If the region has not set its own threshold, the national exemption of €700,000 applies. Many regions, however, have increased this exemption. Spanish tax authorities have recently indicated that this tax may also apply where property ownership is held indirectly through a foreign company.

4. Transfer of properties

When a property is transferred, both the buyer and the seller may be subject to taxes.

The buyer, whether a Spanish tax resident or not, must pay acquisition tax. This will be Value Added Tax (VAT) if the seller is a developer, or Transfer Tax, as determined by the relevant region, if the seller is a private individual or the transaction involves a second transfer.

If the seller is a non-resident taxpayer, the sale may trigger:

1. Non-Resident Income Tax on the capital gain realized from the sale.
2. Municipal Capital Gains Tax, depending on the increase in value and the length of ownership.

Both taxes involve specific rules applicable to non-residents, making specialized advice essential to ensure proper taxation.

At GS Legal Consulting, we would be pleased to assist you with meeting your tax obligations related to property ownership and transactions in Spain.