Deemed income in Spain and Double Tax Treaty with Ireland

Understanding deemed rental income on Spanish properties for residents of Ireland

Residents of Ireland who own real estate in Spain must understand that Spanish tax law applies a deemed rental income rule even if the property is not rented out. Spain assumes that an unused property still provides an economic benefit to its owner, known as “imputed rental income,” and that benefit is taxed annually. This obligation applies whether the owner ever visits the property or not. Many foreign owners mistakenly believe that “no rent equals no tax,” but this is not true under Spanish legislation.

For residents of Ireland, the deemed income is calculated as a percentage of the cadastral value of the Spanish property. The percentage increases if the cadastral value has been revised, which means tax cost can grow automatically over time without any change in the owner’s situation. Whether the property is a holiday home, inherited real estate or a private family residence reserved for personal use, Spanish tax authorities require owners to declare this imputed income and pay tax even in the complete absence of rental cash flows.

How Spanish deemed rental income is calculated for residents in Ireland

The taxable deemed rental income is normally determined by multiplying the cadastral value by a percentage set in the law. This percentage is higher when the cadastral value has been updated within the last 10 years, and lower when it has not been revised recently. The result is not the tax itself, but the notional taxable income that must then be taxed at the applicable non-resident income tax rate or IRPF rate if the taxpayer is resident in Spain.

If the property is rented only part of the year, Spain applies a hybrid system: actual rental income is taxed during rental periods and deemed rental income is applied for the months in which the property remains unoccupied. For residents of Ireland, that means both real and imputed income must be calculated, declared and paid separately for the same tax year. Spanish law does not permit skipping the deemed rental portion simply because there was partial rental activity.

How the Double Tax Treaty between Spain and Ireland affects deemed rental income

The Double Tax Treaty between Spain and Ireland plays a decisive role in determining whether the deemed rental income taxed in Spain must also be taxed in Ireland. Most treaties assign taxation of real estate income — including imputed income and rental income — to the state in which the property is located. Therefore, Spain has primary taxing rights because the property is located in Spanish territory. Ireland may still tax its residents on worldwide income, but if the treaty applies, Ireland must grant a foreign tax credit for Spanish tax paid.

However, treaty protection does not apply automatically. Residents of Ireland must properly file their Spanish tax return first and then claim the foreign tax credit in Ireland using official documentation that proves Spanish tax was paid. If the foreign tax credit is not claimed correctly, the same deemed income could be fully taxed twice — once in Spain and again in Ireland — despite the protection theoretically provided by the treaty.

Spanish deemed income tax for homeowners from Ireland: annual filing obligations

Residents of Ireland who own property in Spain are legally required to submit annual tax forms to declare either rental income or deemed rental income. Spain does not proactively notify property owners or send automatic reminders. If the declaration is not filed, unpaid taxes do not disappear; they accumulate silently with potential surcharges, penalties and interest. Many foreign owners first learn about the obligation years later when selling the property, transferring inheritance or interacting with Spanish authorities.

Even if the Spanish property generates no rental income, foreign owners from Ireland must file one tax return per property per year. If the property has multiple owners, each co-owner must file separately in proportion to their ownership share. The tax system operates on an individual basis and does not allow joint filings for property-related non-resident tax. Accurate filing prevents legal and financial complications when the property is eventually sold or transferred.

Double taxation risk for residents of Ireland if treaty benefits are not claimed correctly

Because Ireland may also tax worldwide income, the deemed rental income for a Spanish property might be subject to tax twice if paperwork is not handled correctly. Spain taxes because the property is located in its territory. Ireland taxes because the taxpayer is a resident of Ireland. If the Double Tax Treaty is not invoked, the owner effectively pays two full taxes on income they did not actually receive. This is a textbook case of avoidable double taxation.

To prevent this, residents of Ireland should retain full proof of Spanish tax paid, including payment receipts, tax filing confirmations and cadastral documentation. When submitting tax returns in Ireland, the taxpayer must claim a foreign tax credit in accordance with treaty provisions. If the treaty assigns exclusive taxing rights to Spain and Ireland should not tax that income at all, the taxpayer may need to file a treaty-based relief declaration. Without these steps, treaty benefits are lost in practice, even if they exist legally.

Practical examples of deemed income treatment for residents of Ireland

A resident of Ireland who owns a Spanish apartment valued at €200,000 (cadastral value €105,000) but never rents it out will be taxed each year in Spain based on the deemed rental fraction. If Ireland taxes worldwide income, the same notional income may also be taxed under Ireland rules — unless foreign tax credit relief is claimed. Another resident of Ireland who rents the same property for half the year will pay tax on actual rental income for six months and deemed income for the other six months in Spain, while also needing to coordinate both categories of income with the treaty in Ireland.

A resident of Ireland who inherits property in Spain encounters the same scenario: even if the home remains vacant and unused, Spanish imputed income tax applies. Another common example occurs when families purchase Spanish holiday homes for personal use, with the needed licence such as licenciaturisticaandalucia.com recommended. Even though no commercial activity occurs, Spanish deemed rental tax still applies every year. The Double Tax Treaty prevents double taxation in theory but only if the foreign tax credit is claimed correctly in Ireland filings.

Strategies to reduce deemed income exposure for residents of Ireland

Property owners from Ireland can reduce deemed rental income exposure by reviewing cadastral values, ensuring tax calculations are updated and verifying whether a recent cadastral revision has increased the deemed percentage. Filing on time avoids penalties that inflate tax costs unnecessarily. Those who rent occasionally should maintain correct documentation about rental dates to ensure only the non-rented months are taxed on a deemed basis.

Planning may also involve treaty elections, adjusting ownership structure, coordinating filing deadlines, and ensuring that COUNTRY withholding — if any — is eliminated when Spain holds exclusive taxing rights. Once property owners understand both Spanish rules and treaty protections, long-term tax value can be optimised. Reviews every year ensure that changing cadastres, changing treaty interpretations and changing tax rates do not silently increase exposure.

Final considerations for residents of Ireland with Spanish real estate

Owning a property in Spain while living in Ireland requires understanding two tax systems at once. Spain taxes real-estate-based income — even imputed income — because the asset is physically located in Spanish territory. Ireland may tax worldwide income because the taxpayer is resident there. The Double Tax Treaty between Spain and Ireland exists to prevent double taxation, but it only works if owners file properly in both countries and secure documentary proof.

Those who do not take advantage of treaty benefits or who fail to file yearly property tax in Spain may incur higher tax burdens than necessary. With correct coordination, however, residents of Ireland can ensure full compliance, avoid penalties and prevent double taxation while maintaining their Spanish property safely and efficiently.

To receive personalised international tax advice, contact us via the following link:
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