How Deemed Income Tax Works for Non-Resident Property Owners

1. What is “Deemed Rental Income” and Why Does It Exist?

Spain, like several other countries, taxes the ownership of a second home by assuming it provides you with notional rental value. The logic is: if you own a property for personal use (not your primary residence), you derive a benefit from it – akin to rental value – even if you don’t actually rent it out. For Spanish tax residents, this deemed income applies to second homes. For non-residents, since every property in Spain is by definition not your main home, it applies to any property you own in Spain that isn’t rented out.

In Spanish, this is referred to as “renta imputada de inmuebles urbanos”, essentially imputed income from urban real estate.

It’s important to note:

• This is not a separate bill that comes in the mail (unlike IBI local tax). You must self-assess it via the IRNR tax return.
  
  

• If you do rent out the property for part of the year, you only pay imputed income for the portion of the year it was not rented.
  
  

• If the property is unused or used by friends/family without rent, that still counts as “not rented” for this tax – so imputed income still applies.
  
  

2. Calculating the Taxable Base: Cadastral Value and Rates

The taxable base for deemed income is a percentage of the cadastral value of the property. The cadastral value (valor catastral) is an assessed value found on your IBI bill, often much lower than market value.

• General rule: 2% of the cadastral value per year is considered your deemed rental income.
  
  

• Exception – updated values: If the cadastral value has been revised in the last 10 years (i.e., the property is in a municipality that had a cadastral update or revaluation in the past decade), the percentage is 1.1%.
  
  

You can find if the 1.1% applies by checking the IBI bill; it often notes the year of last revision. Many areas have had updates, so 1.1% is quite common nowadays, but if in doubt, use 2% or ask the tax office.

Example: Cadastral value is €50,000.

• If updated within 10 years: imputed income = €50,000 * 1.1% = €550.
  
  

• If not: = €50,000 * 2% = €1,000.
  
  

This amount is per whole year. If you owned the property only part of the year (say you bought in April), or if it was rented out part of the year, you prorate by days.

For co-owners, each owner imputes their share of the value. E.g., two owners 50/50, each uses half the cadastral value for their calculation.

3. Tax Rate and Annual Filing

Once you have the imputed income figure, you apply the IRNR tax rate:

• 19% if you are resident in an EU or EEA country.
  
  

• 24% if you are resident outside the EU/EEA.
  
  

So an EU citizen with €550 imputed income owes €104.50 in tax, whereas an American with the same imputed income owes €132.00.

How to declare: You must file a Modelo 210 tax form for this imputed income by December 31 of the year following the tax year. For example, the imputed income for 2024 must be declared by Dec 31, 2025.

If you own multiple properties, a separate Modelo 210 is typically needed for each property’s imputed income.

On the form, you’d use income code 02 (for imputed urban property income) and indicate the number of days it was not rented (usually 365 if not rented at all, or the relevant portion).

Note: Spain recently moved to allow annual filing for non-resident rental income as well, but imputed was always annual. So now you might do one annual return for rent and another for imputed if applicable, or just an imputed return if no rent.

Payment is due by the same Dec 31 deadline. If you have a Spanish bank, you can have it auto-debited if you file a bit earlier (by around December 20), or you can pay manually (some use a bank transfer or wise to Spanish tax account with form reference).

4. When Imputed Tax Does NOT Apply

There are some scenarios where you would not owe imputed income tax on a property:

• Property rented out for the full year: Instead you pay tax on actual rental income for the entire year, so no imputed period (imputed applies only to non-rented periods).
  
  

• New construction still in builder’s hands: If title isn’t yet in your name for the whole year, you only calculate from when you became owner.
  
  

• Property in ruins or uninhabitable: If a property is uninhabitable (and officially recognized as such or not fit for use), arguably imputed income shouldn’t apply (since it can’t provide benefit). However, this is rare and you’d need to discuss with tax office – otherwise as long as it’s on the cadastre and you own it, they expect the tax.
  
  

• Main residence of a Spanish resident: This rule only applies to non-residents or resident’s second homes. If you ever become a Spanish tax resident and the property is your main home, you no longer pay imputed on that (residents don’t pay imputed on their primary home).
  
  

• Properties of negligible value: No explicit exemption – even if cadastral value is low, you still file (the tax might be just a few euros, but technically required).
  
  

In essence, for a typical non-resident with a vacation home they use themselves, imputed tax always applies each year.

5. Penalties and Common Pitfalls

Many non-resident owners are unaware of this tax initially. It’s not heavily publicized. But ignorance isn’t bliss – failing to file can result in:

• Late filing penalties: If you file after Dec 31, a small surcharge (5%, 10%, 15%, 20% depending how late) might apply if you do it voluntarily. If the tax office chases you first, a 50%+ penalty could apply plus interest.
  
  

• If you never file for years, the tax agency might eventually catch on, especially when you eventually sell (they may check if you paid annual taxes). They can go back up to 4 years (prescription period) to assess unpaid imputed taxes.
  
  

Pitfalls:

• Using the wrong base value: Some confuse cadastral value with market value or purchase price. Only use the valor catastral from your IBI receipt.
  
  

• Forgetting prorating: If you rent out part of the year, you must split correctly. E.g., rented 120 days, personal use 245 days -> imputed for 245/365 of the value.
  
  

• One form per owner: If two spouses co-own, both should file (or a combined form with each of their share, which is possible in some cases but generally one per NIE).
  
  

• Not updating for new cadastral revisions: If the town updates values, your imputed base might change. For example, if valor catastral increased, your tax goes up. Conversely if a revision happened, you might drop from 2% to 1.1% base rate – lower tax. Keep an eye on updated IBI bills.
  
  

6. Examples

• Example 1: Alice from Germany owns an apartment she doesn’t rent at all. Cadastral value €80,000, revised in 2016. Imputed base = 1.1% of 80k = €880. Tax at 19% = €167.20. She files by Dec 31 each year.
  
  

• Example 2: Bob from USA owns a villa, cadastral value €50,000 (no recent revision, so 2%). He rents it out in summer (July–August = 62 days) and uses it himself rest of year. Imputed period = 303 days. Base = €50,000 2% (303/365) ≈ €828. Tax 24% of that ≈ €198.72. For the 62 days of actual rent, he’ll file a separate return for rental income.
  
  

• Example 3: Carol and Dan (UK residents) co-own 50/50 a townhouse not rented. Valor catastral €30,000, updated recently. Each has base = €30,000 1.1% 50% = €165. Tax 19% = €31.35 each. They each file Modelo 210 for €31 (some couples may file together by doing two forms but easier just separate).
  
  

• Example 4: Elena, non-resident, forgot to file for 2019, 2020, 2021, 2022. In 2023 she realizes and wants to catch up. She can still file for 2019 (until end of 2023) and later years. Likely a small surcharge ~15-20% plus interest per year late will apply. It’s better she does it than waiting for tax office to send a letter (which could come when she sells or earlier via data matching).
  
  

7. Paying the Tax – Practical Tips

• Where to find cadastral value: Look at your IBI (local rates) bill, it shows valor catastral. Or ask at town hall’s cadastral office or check online if your municipality has virtual office.
  
  

• No income but have to register for tax number: If you don’t have an NIE, you need one to pay this tax. Most property owners get NIE during purchase anyway.
  
  

• Currency exchange: You must pay in euros. Non-residents from outside eurozone might find it convenient to have a Spanish bank. If not, there are ways to get a payment form and use an international transfer quoting the form reference.
  
  

• Record-keeping: Keep copies of your Modelo 210 submissions and proof of payment. They serve as evidence of compliance, which might be useful when selling (a buyer or notary might ask if you’re up to date on taxes, including IRNR).
  
  

• Professional help: Given the small amounts sometimes, you might hesitate to pay an accountant. But some services charge modest fees for a batch of years or multiple properties. It’s a personal call – the form can be done by yourself with guidance from AEAT or online tutorials, but if unsure, a gestor can take care of it relatively cheaply.
  
  

8. The Bigger Picture

It might feel unfair to pay tax when you have no rental income. However, the amounts are usually not high (especially compared to property value or potential rent). Think of it as akin to a second-home tax. Many countries do something similar indirectly through property taxes or other means. In Spain, local property tax (IBI) goes to the town, and this imputed income tax goes to the central government.

The good news is, if you ever become a resident in Spain, you won’t pay this on one home you designate as main. If you sell the property, you stop owing from that point, though ensure final year is covered pro-rata.

Remember: This imputed income does not exist for properties that qualify as business assets or if you truly have them available for rent year-round (like some people advertise year-round even if empty for stretches – though if it’s available for rent, arguably no imputed should apply for those periods; in practice it’s simpler to pay unless you have proof it was actively marketed for rent continuously).

Conclusion: The deemed income tax for non-resident property owners in Spain is a quirk that you need to incorporate into your annual to-do list. It’s predictable and relatively straightforward once you know how it works: take cadastral value, apply 1.1% or 2%, then 19%/24% tax, file yearly. By staying on top of this obligation, you’ll avoid fines and future hassles, and you can enjoy your Spanish home worry-free.

If you need assistance calculating or filing your Modelo 210 for imputed income (or any non-resident tax matters), book an appointment with our tax advisors in Spain. We can handle the paperwork and ensure everything is done correctly so you can have peace of mind. Schedule a session here: Book an appointment.