Spain remains one of the preferred real estate investment destinations for foreign buyers. According to data from the General Council of Notaries, in 2024 foreigners represented 14.7% of residential property transactions in Spain, with an average transaction price higher than that of domestic buyers. This guide examines in detail the tax obligations affecting non-resident investors in the Spanish real estate market in 2025.
IRNR: The Principal Tax for the Non-Resident Property Owner
The Impuesto sobre la Renta de No Residentes (IRNR), governed by Royal Legislative Decree 5/2004 of 5 March (the Consolidated IRNR Act) and developed by Royal Decree 1776/2004, is the tax levied on income obtained in Spain by non-resident individuals and entities.
Rental Income: 19% vs 24%
Rental income from properties situated in Spain is subject to IRNR at the following rates:
- 19% for residents of the European Union, the European Economic Area, Iceland, and Norway. EEA citizens may deduct expenses directly related to generating the income (mortgage interest, property depreciation, insurance, council tax (IBI), community charges, repairs), calculating net income identically to a resident under the personal income tax rules.
- 24% for residents in third countries. These taxpayers are taxed on gross income without the ability to deduct expenses, unless an applicable double taxation treaty provides otherwise.
This differential treatment between EU/EEA and non-EEA residents was declared contrary to EU law by the Court of Justice in its judgment of 3 September 2014 (Case C-127/12), which obliged Spain to equalise the rate for EEA residents. For non-EEA residents, the differential persists and is not challenged at European level.
Imputed Income on Non-Rented Property
A non-resident owner of a property in Spain that is neither rented nor used as a principal residence must impute an annual income of 2% of the property’s cadastral value (1.1% if the cadastral value was revised from 1 January 1994 onwards). This imputed income is taxed at 19% or 24% depending on the owner’s residence.
For example, an apartment with a cadastral value of €100,000 generates imputed income of €1,100 (if cadastral value revised) or €2,000 (if not revised), with an IRNR liability of €209 or €380 respectively for an EU citizen.
VAT on Property Transactions: First vs Second Transfer
Indirect taxation on property transactions follows different rules depending on whether the transaction is a first or second transfer:
- First transfer: subject to VAT at 10% (residential), 4% (social housing), or 21% (commercial premises, garages, and building land). The seller must charge VAT to the buyer, who may reclaim it if they are a VAT taxable person and acquire the property for an economic activity.
- Second transfer: exempt from VAT and subject to Transfer Tax (Impuesto sobre Transmisiones Patrimoniales Onerosas, TPO), with rates set by each autonomous community. Regional rates range from 6% in Madrid and the Balearic Islands to 11% in Catalonia and Galicia. The non-resident buyer of a second-transfer property pays TPO on the market value declared in the public deed.
Wealth Tax for Non-Residents
Non-residents with assets situated in Spain are obliged to file the Wealth Tax (Impuesto sobre el Patrimonio, IP) if the net value of their Spanish assets and rights exceeds €700,000. The state minimum exemption is €700,000, but it applies in full only for residents in autonomous communities without their own regulation. Non-residents are taxed under the state rules, unless they reside in an EU or EEA Member State, in which case they may opt to apply the rules of the autonomous community where the greatest value of their Spanish assets is located.
The progressive Wealth Tax rates range from 0.2% (for the taxable base from €0 to €167,129.45) to 3.5% (for bases exceeding €10,695,996.06), pursuant to the scale in Article 30 of Law 19/1991.
The Temporary Solidarity Tax on Large Fortunes (Law 38/2022) taxes net assets exceeding €3 million at rates of 1.7%, 2.1%, and 3.5%, acting as a supplement to the Wealth Tax. For non-residents with Spanish assets above that threshold, this levy creates an additional burden in autonomous communities that had previously abolished or reduced the Wealth Tax (Madrid, Andalusia).
Capital Gains on Property Sales: The 3% Retention
When a non-resident sells a property in Spain, the buyer — whether resident or not — is obliged to withhold and remit to the AEAT 3% of the sale price as an advance on account of IRNR (Article 25.2 of the Consolidated IRNR Act). This retention is an advance payment of the tax that the non-resident will settle in Form 210.
The capital gain is calculated as the difference between the transfer value (sale price less costs and commissions) and the acquisition value (purchase price plus acquisition costs, including VAT or TPO, notarial fees, and land registry fees). The monetary updating coefficient (abolished since 2015 for residents and not applicable to non-residents) does not apply.
The applicable rate on the gain is 19% for EU/EEA residents and 24% for others. If the 3% retention exceeds the resulting tax liability, the non-resident is entitled to request a refund of the excess.
Double Taxation Treaties and Tax Planning
Spain has double taxation treaties with more than 100 countries. Most of them reserve the exclusive right to tax gains derived from the sale of real estate to the State where the asset is situated (Article 13.1 of the OECD Model), meaning that treaties generally do not eliminate Spanish taxation on real estate capital gains.
However, treaties can reduce the taxation on rental income, limiting the applicable withholding rate or setting specific conditions. Before structuring a real estate investment in Spain, it is essential to analyse the applicable double taxation treaty based on the investor’s country of residence.
Investment Structure: Direct Ownership vs. Company
The non-resident investor may acquire the property in a personal capacity or through a company. Each structure has its advantages and disadvantages:
- Direct ownership: greater administrative simplicity, IRNR taxation at 19%–24% on income and gains, direct application of the investor’s personal treaty, no corporate complexity.
- Spanish company (SL or SA): taxed under Corporate Income Tax at 25%, with the ability to deduct financing costs, depreciation, and all operating expenses. Dividend distribution to the non-resident parent may be subject to 19% withholding (reduced or eliminated under treaty or the EU Parent-Subsidiary Directive).
- Non-EU foreign company: subject to the special levy under Article 40 of the Consolidated IRNR Act (3% annually on cadastral value) if it cannot demonstrate real economic activity or benefit from a double taxation treaty.
At BMC, our specialist tax team advises non-resident investors on Spanish property acquisition structures, compliance obligations, and tax planning. Learn about our tax services.
