Renting out a property: how rental income is taxed under IRPF

You own a property and rent it out: that income isn't “free money”, it pays IRPF as capital income from real estate. The good news is the scheme is simple and, done right, you can even skip the annual return. Here's how.

How much: 10.5%

The effective rate on rent is clear and set by the DGI:

Per the DGI:

«Retenciones y anticipos por el arrendamiento de inmuebles se calculan como el 10.5% del total de ingresos devengados.»

In English: Withholdings and advances on property rentals are computed as 10.5% of total accrued income.

With or without a withholding agent

If you rent through a real-estate agency or a withholding agent, they withhold that 10.5% and remit it to the DGI each month. If there's no agent, you make the advance yourself, also monthly. Either way the percentage is the same.

The option to skip the return

Here's the practical trick: you can give those withholdings or advances a definitive character and be released from filing the annual return.

The DGI allows it expressly:

«los contribuyentes podrán dar carácter definitivo a las retenciones efectuadas y a los anticipos realizados, quedando liberados de practicar la liquidación del impuesto y presentar la correspondiente declaración jurada anual, formulario 1101.»

In English: taxpayers may give the withholdings made and the advances paid a definitive character, being released from settling the tax and filing the corresponding annual return, form 1101.

Exemption in certain cases

There's an exemption for some rentals (e.g. depending on the annual amount and if tenant and owner meet certain conditions and identify the contract). It's processed with the DGI:

If you're a non-resident owner

If you aren't a tax resident, the rent isn't taxed under IRPF but IRNR — also with a 10.5% withholding. We cover it in our IRNR for non-residents post.

At a glance

In short: rent pays IRPF at 10.5%, monthly, and you can avoid the annual return by making it definitive. Check whether the exemption applies to you and, when in doubt, ask the DGI or your accountant.