Owning a holiday home in Spain is a fantastic opportunity to enjoy the sun while creating a source of income. But whether you’re a resident or non-resident of Spain, the Spanish government requires you to file income taxes on your rental earnings.
For non-resident holiday home owners from the EU, the income tax rate on rental income is 19%. This tax applies to your net income, which is your rental revenue after allowable expenses are deducted. Let’s dive into the details of calculating your tax, step by step, so you can keep more of your rental earnings in your pocket.
This is how you do the math for you Spanish income tax
1) Determine your total revenue for the year
To start, you’ll need to calculate your total revenue from rental bookings over the year. This includes all the income you received from guests, including any additional fees they paid for services such as cleaning, extra guests, or late check-in. Make sure to keep a thorough record of each booking and payment, as you’ll need this information to accurately report your earnings.
Tip: Use your net booking revenue. For example, if you get revenue through airbnb, just use the amount you actually get paid. There's no need to include the commissions or so.
2) Determine your fully deductible costs
Many of your expenses related to managing your holiday rental are deductible. This includes services directly tied to running the rental, like cleaning costs, property management fees, advertising expenses, and even maintenance and repairs that keep the property in rentable condition.
Examples of fully deductible costs include:
- Cleaning fees and laundry services after each guest
- Property management fees if you work with a local agency (this is what I do)
- Utility bills (water, electricity) for the rental period
- Advertising costs (listing fees, if not already deducted by the platform)
- Minor repairs and routine maintenance
To ensure these costs are fully deductible, make sure they are directly related to the rental activity and are not excessive. For example, routine maintenance is deductible, but a full renovation may not be (instead, these would fall under investment costs, as we’ll cover next).
3) Determine investments that can be deducted
For larger investments in the property—such as new furniture, kitchen appliances, or major upgrades—Spanish tax law requires you to deduct these expenses over multiple years rather than all at once. This type of expense is known as “depreciation,” and it applies to high-cost items or improvements that add long-term value to the property.
Common examples and their typical depreciation rates:
- Furniture and appliances: 10% per year over 10 years
- Renovations and upgrades: Depending on the type of renovation, some may depreciate at a different rate. Consult a tax advisor if you’re unsure.
To calculate the annual deductible amount, simply take the total cost of the investment and apply the relevant percentage. For example, if you invested €2.000,- in new furniture, you could deduct €200 each year for 10 years (10% of €2.000,-).
4) Pro-rating costs based on number of rental days
Now comes a key part of calculating your tax deduction: pro-rating your costs based on the number of days your property was rented out. This is important because you can only deduct expenses for the days when the property was actively rented.
To do this, take each expense category and multiply it by the ratio of days rented out to the full year (365 days). Here’s the formula:
Deductible expense = (Number of rental days / 365) * Expense
for example, if your property was rented for 120 days in the year, and you had €240 in costs for your internet connection, the deductible portion would be:
Deductible internet cost = (120 / 365) * €240 = €80,90
This same formula applies to each category of deductible costs, from utilities to service fees, so you get a fair deduction based on actual rental activity.
5) Final calculation: Putting it all together
Tracking cash flow and return on investment is essential to understand how profitable the property really is. We looked at both monthly and annual cash flow, factoring in all costs from mortgage and maintenance to taxes and management fees. By keeping tabs on these numbers, we always know how the property is performing from a financial perspective.
- Total revenue: €10.000
- Deductible costs (pro-rated): €3.000
- Investment depreciation: €200 (10% of €2.000 furniture investment)
- Net taxable income: €10.000 - (€3.000 + €200) = €6.800
- Income tax (19%): €6.800 * 0,19 = €1.292
In this example, you would owe €1,292 in income tax on your holiday rental income.
Important: store your evidence!
Spain requires you to be able to show all evidence for your tax filings. That means proof of the rental revenue and proof of costs and investments (via invoices and receipts that have your NIE number on it). And, you need to store all that data for 4 years!
You can Excel your way into this if you want. But, if you're looking for an easy ready-to-go solution, then AvenidaHQ could be a great fit for you!
