Long-Term Rental Taxation on the Costa del Sol (2025)

17/08/2025

If you own (or are thinking about buying) a flat on the Costa del Sol and want to rent it out long-term, the first big question is simple: after tax, how much do I actually keep?

Spain's rental tax rules can look complicated, especially with new reductions (60%, 70%, 90%, 50%), different treatment for residents vs. non-residents, and tenant protections under the LAU. But when you see the numbers, the logic is clear. Let's walk through it step by step, with two easy examples: a property rented at €750/month and one at €1,500/month.

Residents vs. Non-Residents: The Fork in the Road

Your first step is deciding whether you are taxed as a Spanish resident or a non-resident.

Spanish residents declare rental income in their annual IRPF (personal income tax). The big advantage: they can use powerful reductions that drastically lower the taxable base.
Non-residents pay IRNR (non-resident income tax). EU/EEA owners are taxed at 19% (they can deduct costs like IBI and depreciation), while non-EU/EEA owners pay a flat 24% on gross rent (no deductions allowed).
Owning a property here does not make you a resident. Only living in Spain for more than 183 days per year, or moving your main income/family ties here, does.

👉 In practice, this first distinction is the single most important factor in how much you keep.

The engine of the calculation (for everyone): net income

Your rent starts as gross income. From that, you subtract allowable expenses to get net. The most universal one is depreciation (amortización): 3% per year of the building value (not the land), based on the higher of (i) your building portion of purchase cost (plus purchase taxes/fees) or (ii) the cadastral building value from the IBI.

This depreciation is applied every year, even if you have no other costs.
If your tenant pays IBI, community fees, trash and utilities directly, you don't deduct those (you didn't incur the cost). Depreciation usually remains the key expense.

The Resident Advantage: Reductions

For Spanish residents, once expenses are deducted, further reductions apply if the rental is the tenant's habitual home:

60% → The classic rule, for contracts signed before May 2023.
50% → The default reduction for contracts signed after May 2023 without special conditions.
70% → If in a tensioned area and the tenant is 18–35, or the property is leased to a public/social housing entity.
90% → The "golden ticket," but only if:
1. The property is in a tensioned area;
2. A new contract is signed;
3. Rent is cut by more than 5% compared to the previous contract (after updates).

👉 The 90% and 70% require an official "zona de mercado residencial tensionado" designation. As of August 2025, the State provides a checker, but Andalucía has not generally declared Málaga/Costa del Sol as tensioned (there's ongoing political debate). In practice, most landlords here won't qualify for the 90%/70% unless their municipality is formally designated. Always verify current status on the government's map before assuming you can use 90%/70%.

Scenario 1: €750/month Rent (€9,000/year)

To keep things consistent, I'll assume:

Tenant pays IBI, community, utilities, trash and routine repairs.

Only depreciation (3%) is deducted. For illustration, let's use €3,600/year depreciation (typical if your building-value base is ~€120,000).

I'll use the 19% income-tax rate to show the mechanics; if your personal bracket is higher, the tax in € scales up proportionally.

Spanish resident, pre-2023 lease (60%)

Net before reduction: €9,000 – €3,600 = €5,400
Taxable base (after 60% reduction): €2,160
Tax at 19% = €410
Net income: €8,590/year

Spanish resident, post-2023 lease (50%)

Taxable base: €2,700 → Tax: €513
Net income: €8,487/year

Spanish resident, 90% reduction (ideal case in a tensioned area with >5% rent cut)

Taxable base: €540 → Tax: €103
Net income: €8,897/year

EU/EEA non-resident (19%, deductions allowed, no reductions)

Net before tax: €5,400 → Tax: €1,026
Net income: €7,974/year

Non-EU/EEA non-resident (24%, no deductions)

Tax: €2,160
Net income: €6,840/year

Scenario 2: €1,500/month Rent (€18,000/year)

(Depreciation stays €3,600 to show how it becomes proportionally smaller as rent rises.)

Spanish resident, pre-2023 lease (60%)

Taxable base: €5,760 → Tax: €1,094
Net income: €16,906/year

Spanish resident, post-2023 lease (50%)

Taxable base: €7,200 → Tax: €1,368
Net income: €16,632/year

Spanish resident, 90% reduction (ideal case)

Taxable base: €1,440 → Tax: €274
Net income: €17,726/year

EU/EEA non-resident

Taxable base: €14,400 → Tax: €2,736
Net income: €15,264/year

Non-EU/EEA non-resident

Tax: €4,320
Net income: €13,680/year

What These Scenarios Show

The resident's 60% rule is the single most powerful benefit. It keeps effective tax rates very low (≈5–10% of gross rent).
The jump to 90% reduction sounds dramatic, but the actual yearly difference can be modest at low rents (€310 at €750/month) and more significant at higher rents (€820 at €1,500/month).
EU/EEA non-residents face almost double the effective tax rate of residents (~15%).
Non-EU/EEA non-residents face the heaviest load: always 24% of gross rent, with no deductions.

"Will a higher purchase price save me more tax each year?"

Yes, but usually only a little in housing leases. A higher price (allocated to building) increases the 3% depreciation, which lowers taxable income. But after the 60%/50%/90% reduction, the IRPF applied amount is already small, so the € saved each year from "more depreciation" is limited—especially at the 19% bracket. (It matters more if you're in a higher IRPF bracket or don't qualify for housing reductions.)

Selling a Rented Property: What Happens?

If you sell while the property is rented, the tenant's rights under the LAU are protected:

Contracts of at least 5 years (7 if landlord was a company) must be respected by the buyer.
If the lease was registered in the Land Registry, the new owner inherits the full contract.
If not registered, the new owner still must respect the minimum legal duration (3 months*).
The only way to gain early possession is usually by negotiating compensation with the tenant — the law doesn't set an amount, it's a private deal.
The tenant also enjoys a right of first refusal: they must be offered the chance to buy at the same terms as the buyer.

Quick "rules of thumb" you can keep in your pocket

90% reduction: only if all conditions are met; on the Costa del Sol, it hinges on actual tensioned-area designation (still contentious in 2025—check the official map).
Non-EU/EEA non-resident: a flat 24% of gross (no deductions, no reductions).
EU/EEA non-resident: around 12–18% (no reductions, but you can deduct expenses).
Resident with housing lease: your effective tax is often roughly 5–10% of gross rent (closer to the low end at modest rents).

👉 The real driver is your residency status. The shiny 90% reduction only helps if your property is in a tensioned area and you sign a new rent-cut contract.

*figures simplified for illustration

Dictionary of Key Terms

AEAT (Agencia Estatal de Administración Tributaria)
The Spanish Tax Agency. Handles income tax (IRPF), non-resident tax (IRNR), VAT, etc. Their website is the official source for tax forms and guidance.

BOE (Boletín Oficial del Estado)
Spain's Official State Gazette. All laws, decrees, and official regulations (like the LAU updates) are published here.

MIVAU (Ministerio de Vivienda y Agenda Urbana)
Spain's Ministry of Housing and Urban Agenda. Publishes maps and criteria for tensioned residential areas where special rental reductions apply.

IBI (Impuesto sobre Bienes Inmuebles)
Annual local property tax, based on cadastral value. Paid to the Ayuntamiento (municipality). Shows split between land and building value.

Valor Catastral
Tax-assessed value of a property, usually lower than market price. Split into:

Valor del suelo = land value
Valor de la construcción = building value

IRPF (Impuesto sobre la Renta de las Personas Físicas)
Personal Income Tax for residents in Spain. Progressive scale (19%–47%). Rental income taxed here benefits from reductions (60%–90%) if it's a tenant's habitual residence.

IRNR (Impuesto sobre la Renta de No Residentes)
Non-Resident Income Tax. Flat rate:

19% (EU/EEA residents, expenses deductible)
24% (non-EU/EEA residents, no deductions).
Declared quarterly via Modelo 210.

Modelo 210
Tax return form for non-residents to declare rental income in Spain. Filed quarterly with AEAT.

Depreciation (Amortización)
Deduction for building wear and tear. Standard: 3% annually of building value (not land), based on higher of purchase cost (excluding land) or cadastral building value.

LAU (Ley de Arrendamientos Urbanos)
Spain's Urban Leases Act. Governs residential and commercial rental contracts. Sets minimum lease durations (5 years for individuals, 7 for companies), renewal rules, tenant rights, and obligations upon property sale.

Zona de mercado residencial tensionado
"Tensioned residential area." Declared by regional authorities (via MIVAU criteria). Only in these zones can landlords access the new 70% or 90% IRPF rental reductions (under strict conditions).

Plusvalía Municipal (Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana)
Municipal tax charged on the increase in cadastral land value between purchase and sale. Paid when property is sold.

Capital Gains Tax (Ganancias Patrimoniales en IRPF)
National tax on the profit from property sales (sale price minus acquisition cost, adjusted for expenses). Progressive rates:

19% up to €6,000
21% from €6,000–50,000
23% from €50,000–200,000
27% from €200,000–300,000
28% above €300,000

Tanteo y Retracto
Tenant's rights of first refusal:

Tanteo = right to buy before a third party, at the same price.
Retracto = right to step in after a sale and buy under the same terms, if not previously offered.

Socimi (Sociedades Cotizadas Anónimas de Inversión Inmobiliaria)
Spain's version of a REIT. A corporate vehicle with special tax benefits (0% corporate tax if conditions met) for property investment. Often used for rental portfolios.