Spanish Rental Income Tax for Israeli Non-Residents

The Core Issue: 19% vs 24% IRNR Rate

When Israeli non-residents earn rental income from Spanish property, they enter the scope of the Impuesto sobre la Renta de No Residentes (IRNR) — Spain's non-resident income tax. The critical issue for Israeli landlords is that Spain applies a 24% rate on gross rental income, with no ability to deduct expenses. This contrasts sharply with the treatment of EU and EEA residents, who pay 19% on net income after deducting allowable costs.

Israel is not a member of the European Union or the European Economic Area. Unless a specific bilateral provision in the Israel-Spain Double Tax Treaty creates a more favourable regime (which the 1999 DTT does not in this context), Israeli non-residents are treated as third-country residents for IRNR purposes and cannot claim the preferential EU/EEA treatment.

What Counts as Taxable Rental Income

Spanish IRNR taxes all sums received by the non-resident landlord in connection with the rental or use of Spanish real estate. This includes:

• Monthly rent payments (renta mensual)
• Tourism rental income (Airbnb, Booking.com, holiday lettings)
• Advance payments and deposits retained at the end of a tenancy
• Compensation received for early lease termination by a tenant
• Any service charges or utility costs paid by the tenant that benefit the landlord

Security deposits refunded at the end of a tenancy are not income. Management fees paid to a letting agent reduce the amount received by the landlord — but since non-EU/EEA residents cannot deduct expenses, this does not reduce the IRNR taxable base.

No Expense Deductibility: The Non-EU Penalty

For EU and EEA residents, Spanish IRNR allows a comprehensive range of deductions from gross rental income:

• Mortgage interest payments on Spanish property financing
• Community fees (cuota de la comunidad de propietarios)
• Property insurance premiums
• Letting agent fees and management commissions
• Routine repair and maintenance costs
• Property depreciation (3% of the construction cost per year)
• Local property taxes (IBI)

Israeli non-residents can deduct none of these expenses. The 24% IRNR applies to the gross rent received. On a property generating €24,000 per year in rent, the IRNR charge is €5,760 — regardless of what the landlord actually spends on mortgage interest, repairs or management.

Quarterly Filing on Modelo 210

Israeli non-residents must file Modelo 210 quarterly for rental income. Each quarterly return covers income received in that calendar quarter, and is due within the first 20 days of the following month:

Each Modelo 210 is filed electronically through the AEAT portal. If the property is held jointly (e.g., by two spouses), each co-owner files their own Modelo 210 for their proportionate share of the income. The NIE of the non-resident taxpayer is required for all filings.

Failure to file quarterly returns on time attracts late filing surcharges of 5% (within 3 months), 10% (3–6 months), 15% (6–12 months) or 20% (over 12 months) of the tax due, plus potential interest. The AEAT cross-references Modelo 210 filings against rental income reported by tenants and platforms, so non-filing is increasingly detectable.

Deemed Rental Income for Unoccupied Properties

Even when a Spanish property is used only as a holiday home and not rented out at all, Israeli non-resident owners must declare and pay IRNR on imputed rental income (imputación de rentas inmobiliarias). The imputed income is:

• 2% of the property's cadastral value (valor catastral) if the value has not been revised since 1994.
• 1.1% of the cadastral value if the value was revised in 1994 or later.

This imputed income is taxed at the 24% IRNR rate for Israeli non-residents. The annual Modelo 210 for imputed income is filed between 1 January and 31 December of the year following the year in which the property was held (so for the 2025 tax year, the return is filed in 2026). A single annual return covers the entire year's imputed income for one property.

Tourism Rentals: Additional Licensing Obligations

Israeli investors who rent their Spanish properties via short-term platforms (Airbnb, Booking.com, HomeAway) must comply with tourism licensing requirements imposed by the autonomous community and municipality, in addition to the IRNR filing obligations. Most regions require registration of tourism apartments with the regional tourism authority before rentals can be advertised. The licences vary significantly by region — Andalusia has a relatively permissive framework, while Barcelona and Madrid have imposed strict quota systems in tourist areas.

From 2024, Spanish rental platforms are also required to report to the AEAT the identity of landlords and the amounts earned — creating a data trail that makes non-compliance with IRNR filings increasingly risky.

Should Israeli Landlords Consider Spanish Tax Residency?

For Israeli nationals with significant Spanish rental portfolios, establishing Spanish tax residency — and filing under IRPF rather than IRNR — can dramatically improve the net tax position. Spanish residents can deduct all property-related expenses from rental income, and the effective rate on net income is lower than the 24% gross IRNR rate for most rental yields.

The trade-off is full Spanish tax residency, which brings worldwide income taxation, Modelo 720 foreign asset disclosure obligations, and wealth tax exposure on worldwide assets. A comprehensive analysis — comparing the IRNR position against the IRPF position including all worldwide income and assets — is essential before any decision. Contact Jacob Salama to model the two scenarios for your specific portfolio.