Commercial Property Rental Taxation in Spain

7 July 2026 · 6 min read

The return on a rented property is not measured solely by the income it generates: it also depends on how much the investor retains after tax. Understanding the tax rules before purchasing is not a technicality — it is part of the investment analysis.

Individuals: property capital income

When a private individual lets a commercial property — a retail unit, office, or industrial unit — the income is taxed as property capital income under personal income tax (IRPF). The effective rate varies according to the savings tax base, ranging between 19% and 28% from 2024 onwards for bases above €300,000.

Unlike residential lettings, commercial property rental does not benefit from the 60% reduction on net income. What the rules do allow is the deduction of all expenses necessary to earn the income: depreciation of the property (generally 3% of the construction value), financing interest, council tax (IBI), insurance, management fees, repairs and maintenance.

Companies: Corporation Tax

If the property is acquired through a company, the rental income forms part of the accounting result and is taxed at the general rate of Corporation Tax, currently 25% (23% for SMEs with turnover below €1m). Asset depreciation — calculated using official tables — reduces the taxable base year by year.

A relevant advantage of the corporate structure is the flexibility to offset losses from prior years and the ability to apply reinvestment deductions when the asset is sold.

VAT on commercial lettings

The letting of commercial properties is subject to VAT at the standard rate of 21%. The landlord charges the tax to the tenant on each rental invoice, and at the same time can deduct the input VAT on expenses related to the property. This makes VAT neutral for most business tenants — who charge and reclaim it — and requires the landlord to comply with quarterly filing obligations.

Key deductible expenses

• Property depreciation: the central element for reducing tax liability. Land is not depreciated; only the building itself.
• Mortgage interest: fully deductible under both IRPF and Corporation Tax.
• IBI, insurance and service charges: deductible when borne by the landlord under the contract.
• Management and administration fees: property management or intermediary costs.
• Repairs and maintenance: to be distinguished from improvements, which are capitalised and depreciated.

Individual or company: when each structure makes sense

The choice depends on the portfolio size, the investor’s marginal IRPF rate, and reinvestment objectives. As a general rule, for significant portfolios with several assets and a long-term horizon, the corporate structure offers greater tax efficiency and better asset separation. For single assets with moderate rents, direct taxation under IRPF may be simpler.

In any case, the decision should be made with specific tax advice before acquisition: the cost of correcting a poorly chosen structure is high.