What rental income reductions are available to landlords resident in Spain?
For landlords subject to Spanish Personal Income Tax, the decree replaces the existing system of reductions on positive net income from residential rentals under Article 23.2 of the Personal Income Tax Act.
The new reductions apply to agreements entered into after 1 December 2026. Earlier agreements retain the reduction that already applied to them under the thirty-eighth transitional provision.
The percentage depends on how the new rent compares with the previous rent, whether the property is located in a stressed residential market area, and the tenant’s age. For reductions linked to a new agreement, the landlord cannot be classified as a large property holder.
| New tenancy agreement | Reduction in net rental income |
|---|---|
| Initial rent reduced by more than 5% compared with the previous rent, with the same tenant after the minimum five-year term or latest extension | 100% |
| Same reduction with a different tenant, where the rent is below the applicable reference price index cap | 100% |
| Reduction of more than 5% in other cases: stressed residential market area and tenant aged 18–35 | 95% |
| Reduction of more than 5% in other cases: stressed residential market area | 90% |
| Reduction of more than 5% in other cases: tenant aged 18–35 | 85% |
| Reduction of more than 5% in all other cases | 70% |
| Initial rent no higher than the previous rent | 50% |
| Initial rent increased by up to 5% | 40% |
| Increase of more than 5% and up to 10% | 30% |
| Increase of more than 10% and up to 15% | 25% |
| Increase of more than 15% and up to 20% | 20% |
| Increase of more than 20% | 15% |
| Property rented out for the first time at a rent below the reference index cap | 100% |
| Property rented out for the first time at a rent equal to or above the reference index cap | 50% |
In addition:
- Where the tenant is a public authority or non-profit organisation using the property for social housing, the reduction is 70%, or 60% where the property was refurbished during the two years preceding the agreement. These two reductions do not require the landlord to fall outside the large property holder category.
- During a tacit extension of the agreement, where the rent does not exceed the reference index cap, the reduction is 80%.
- Where several reductions could apply, the highest percentage applies.
- The reductions for stressed residential market areas, at 95% and 90%, depend on the areas included in the resolution issued by the Spanish Ministry of Housing and Urban Agenda and, in practice, only apply where the relevant autonomous community has formally designated the area.
For resident tenants, the decree also creates a 10% national tax deduction for amounts paid to rent their main residence, provided their taxable income is below €33,007.20, up to a maximum deduction of €1,163.
Neither the taxpayer nor their household may own another home within 50 kilometres for at least half of the relevant period.
What restrictions apply to acquisitions of residential property and portfolios?
From the date the decree entered into force until 31 December 2030, Article 1 restricts acquisitions of residential property, whether for consideration or free of charge, where the consideration is less than 70% of market value.
The restriction applies to two categories of purchaser:
- Entities whose business involves acquiring properties or portfolios of defaulted mortgage loans at prices clearly below their appraised value.
- Legal entities classified as large property holders, other entities within their group and parties acting on their behalf.
Market value must be determined by an independent valuation company authorised and registered with the Bank of Spain. The purchaser must provide the valuation report. The consideration includes debts assumed and any related financial benefits.
The restriction does not apply in certain cases, including where the property is allocated to affordable or social housing as a main residence until at least 31 December 2030, where the purchaser is a public body acquiring it for that purpose, or where the transfer was executed in a public deed before the decree entered into force.
The exemption linked to compliance with a Code of Good Practice cannot be relied upon until the Council of Ministers approves that code.
This makes the definition of a large property holder particularly important for investors.
Under Law 12/2023, as amended by the decree, this means a natural or legal person owning more than ten urban residential properties or more than 1,500 m² of residential floor area, excluding garages and storage rooms.
In a stressed residential market area, the autonomous community may reduce the threshold to five properties.
Two new rules are particularly relevant:
- Large property holder status must be evidenced by a certificate from the Land Registry listing the properties registered in the owner’s name.
- If a single registered property comprises a building containing several units capable of residential use, each residential unit counts as a separate property, even if no formal horizontal property division has been registered.
What changes when buying a tenanted property?
The new Article 25 of the Spanish Urban Leases Act regulates the tenant’s preferential acquisition rights as follows:
- Pre-emption right: the tenant has 30 calendar days from formal notification of the decision to sell, including the price and essential terms.
- Redemption right: the tenant has 30 calendar days from the purchaser’s notification of the terms of the sale, accompanied by a copy of the deed, where there was no prior notification, a requirement was omitted or the final price was lower.
- Portfolio or combined sale: these rights do not disappear merely because the dwelling is sold together with other homes, commercial premises or assets, provided the dwelling can be legally identified as an individual unit. The price allocated to the dwelling must be established using objective and verifiable criteria. Any allocation designed to prevent the tenant from exercising their rights will not be enforceable against them.
- Land Registry: registration of the sale of a tenanted property requires evidence that the relevant notices have been served. If the property is not tenanted, the seller must state this in the public deed.
- No waiver: the tenant cannot waive these rights.
For an investor acquiring a portfolio or a building containing rented homes, this can affect both transaction structure and completion timetable.
In addition, the sale of a rented property does not affect the tenant’s entitlement to compensation for non-renewal under Royal Decree-Law 28/2026. That obligation passes to the purchaser who assumes the landlord’s position.
How do the new rules affect residential tenancy agreements?
The amendments to the Urban Leases Act introduced by Royal Decree-Law 29/2026 affect tenancy agreements in several areas:
- Initial rent in a stressed residential market area: it cannot exceed the latest rent charged for the same property during the previous five years, once updated. An increase of up to 10% is permitted where refurbishment, energy-efficiency improvements or accessibility works were carried out in the previous two years, or where the agreement has a term of at least ten years. If the landlord is a large property holder, the rent cannot exceed the applicable reference price index cap.
- Rent reviews: these may only be made by reference to the Housing Rent Update Reference Index (IRAV). Without an express contractual provision, no rent review applies. Until 31 December 2027, no increase is permitted where the rent exceeds the reference index cap and, in all other cases, without an express agreement any increase may not exceed 2%.
- Costs: estate agency and contract preparation costs, as well as taxes associated with the property, cannot be passed on to the tenant unless the tenant is legally liable for the tax.
- Security: any additional security on top of the statutory deposit may not exceed two months’ rent, or one month for temporary agreements. Landlords may not require rent default insurance.
- Advertising: where applicable, every listing must state the reference index, the applicable rent cap, the property identification code and whether the landlord qualifies as a large property holder.
- Extraordinary extension: a tenant whose mandatory extension period expires before 31 December 2028 may request up to two additional years, granted one year at a time, provided that all rent payments are up to date. This does not apply where the parties agree a rent at least 5% lower.
If Royal Decree-Law 28/2026 is ratified, from 15 November 2026 a primary residence tenancy agreement reaching the end of its minimum five-year term, or seven years where the landlord is a legal entity, will be extended in successive periods of five years, or seven years for legal-entity landlords, unless either party gives notice.
Landlords will have to give six months’ notice, rather than the previous four. Where the landlord chooses not to renew, they must pay compensation equal to the greater of 12 months’ rent or one month’s rent for each year the tenant has lived in the property, unless an exclusion applies.
Possible exclusions include the landlord needing the property for themselves or relatives up to the second degree, or the parties entering into a new agreement.
What changes for temporary rentals, tourist accommodation and SOCIMIs?
- Temporary rentals: the agreement must specify the reason for the temporary stay, which must be genuine and capable of being evidenced. The burden of proof lies with the landlord. The term must exceed 31 days and, as a general rule, may not exceed 12 months. Where more than two consecutive temporary agreements are entered into between the same parties for the same property, the first is treated as a primary residence tenancy. Temporary agreements entered into before 8 October continue under their existing rules until the agreed end date, with no extension.
- Tourist rentals: accommodation subject to tourism legislation remains outside the Urban Leases Act, with a maximum stay of 31 days as determined by the competent authority. From 1 December 2026, rentals of furnished residential property for stays of up to 30 nights will no longer be VAT-exempt and will instead be subject to 10% VAT, except where the property is the landlord’s main residence.
- IBI local property tax: in municipalities containing stressed residential market areas, local councils may introduce a surcharge of up to 50% on tourist accommodation, rising to 100% for owners of two or more such properties and 150% for owners of four or more. Surcharges may also apply to properties that have remained permanently vacant, meaning for more than two years without justified cause. These may reach 50%, or up to 100% depending on the number of properties owned or the length of the vacancy.
- SOCIMIs: the special levy on undistributed profits arising from residential rentals increases from 15% to 25%, with reductions of 50% or 100% where more than 80% of the portfolio consists of affordable rental housing. For 2026 and 2027, transitional thresholds of 60% and 70% apply respectively.
- Municipal capital gains tax: new maximum coefficients apply from 1 December 2026. This affects all transfers, including those involving non-residents.
What should foreign investors review now?
- If the purchaser is a legal entity or belongs to a corporate group, check whether it qualifies as a large property holder under the new method of counting individual residential units.
- For acquisitions below market value, determine whether the 70% restriction applies and which exemption, if any, can be relied upon.
- When purchasing rented properties or portfolios, review the tenant’s pre-emption and redemption rights and the price allocated to each individual dwelling.
- Review the terms of both new and existing tenancy agreements, including rent, IRAV updates, costs, security and the grounds for temporary occupation.
- Identify agreements expiring in the coming months and review the relevant notice periods, particularly the difference between four and six months.
- For tourist rentals, review the 10% VAT treatment from 1 December 2026 and the owner’s Spanish tax registration position.
- Confirm the investor’s tax residence and which tax legislation applies.
- Identify transactions that depend on parliamentary ratification. If a Royal Decree-Law lapses, its measures cease to apply.
Frequently asked questions about the housing decrees for foreign investors
Have the housing decrees changed taxation for non-residents?
Not under the legislation as published.
Royal Decree-Law 29/2026 does not amend the Spanish Non-Resident Income Tax Act. The new rental income reductions and rental deduction are introduced through the Spanish Personal Income Tax Act.
Does the 70% restriction affect a foreign individual buying a residential property?
Article 1 applies to entities whose business involves acquiring properties or defaulted loan portfolios significantly below their value and to legal entities classified as large property holders.
An individual who does not fall within those categories is outside the scope of this restriction, although each transaction should be assessed on its own facts.
When is an investor considered a large property holder?
When they own more than ten urban residential properties or more than 1,500 m² of residential floor area, excluding garages and storage rooms.
In a stressed residential market area, the threshold may be reduced to five properties.
Each residential unit in a building counts as a separate property, even if the building has not been formally divided into separate units in the Land Registry.
Can the tenant buy the property before the investor?
Yes.
The tenant has statutory pre-emption and redemption rights over the rented dwelling, including where it is sold together with other assets provided it can be legally identified as a separate unit. The tenant cannot waive these rights.
What happens if the Royal Decree-Laws are not ratified?
They will cease to have effect and the measures they contain will no longer apply, as happened with the two previous Royal Decree-Laws adopted on 29 September.
This article will be updated once the outcome of the ratification process is published.
What changes for tourist rentals?
From 1 December 2026, rentals of furnished residential property for stays of up to 30 nights will be subject to 10% VAT, except where the property is the landlord’s main residence.
Local councils in stressed residential market areas may also introduce IBI surcharges on tourist accommodation.
How these changes affect individual transactions
The two Royal Decree-Laws affect several elements of a residential investment at the same time: the acquisition itself, the tenancy agreement, VAT and the taxation of the investing company.
The right approach will depend on who is acquiring the property, how the transaction is structured, whether tenants are already in place and whether the relevant provisions survive the parliamentary ratification process.
At Certus, we advise international clients on legal and real estate matters and on establishing businesses in Spain, including housing and employee relocation.
For advice on a specific transaction, please visit our contact page.
This article is for general information purposes only and does not constitute legal advice.
Reference legislation: Royal Decree-Law 29/2026 of 6 October adopting urgent measures to protect the social function of housing and increase the supply of affordable housing; Royal Decree-Law 28/2026 of 6 October adopting urgent measures to strengthen the stability of primary residence tenancy agreements; Law 29/1994 of 24 November on Urban Leases; Law 35/2006 of 28 November on Personal Income Tax; Law 12/2023 of 24 May on the Right to Housing; and the consolidated text of the Non-Resident Income Tax Act. Position as at 14 October 2026.
