For a Spanish Resident, property rental income can be incredibly tax efficient
It is commonplace to overhear conversations or see comments on social media where people are talking about how high taxes are in Spain compared to the UK.
By my reckoning, for the average person income tax and other taxes aren’t that much different between the two countries.
What you very rarely hear people talk about though, are some of the quite frankly amazing tax breaks available here. I use the word ‘breaks’ a little tongue in cheek, but if you are a Spanish resident, the tax treatment of residential rental income is a good example of why I choose to use those words.
Many people move here from the UK keeping what was their main family home there, and deciding to rent it out on a long term basis. It is surprising how many people have no idea what a tax efficient source of income that can prove to be.
Many expenses, as well as mortgage interest, are allowable deductions. Furthermore a 60% reduction is then applied to the final taxable amount. Even lesser known is the fact there is a further annual depreciation allowance of 3% of the rebuild cost, but if this figure is not known, then this is reduced to 1.5% of the property value.