Landlords Must Declare Rental Income Even If It Is Not Collected

Home

The Central Economic-Administrative Court (TEAC) has clarified that landlords in Spain are required to declare rental income in their tax returns even when the rent has not been paid by the tenant, as long as those amounts remain legally enforceable.

Legal basis: income is taxable when it becomes due, not when collected

In a ruling dated June 24, 2025, the TEAC confirmed that non-payment does not exempt landlords from their tax obligations, aligning its position with the Supreme Court’s doctrine. In other words, the Spanish Tax Agency (Hacienda) considers rental income to exist as soon as it becomes due under the contract, regardless of whether it has been received.

A case involving a non-resident landlord

The case involved a Swiss resident who owned a rental property in Spain. During 2018 and 2019, the tenant stopped paying rent, yet the owner submitted her Non-Resident Income Tax (IRNR) returns using form 210, as required.

Later, she requested a correction and refund, arguing that she had not actually received the declared income. The National Tax Management Office rejected her request, and the TEAC upheld the decision, ruling that non-payment does not cancel the obligation to declare the rent as long as it remains enforceable.

The obligation applies to both residents and non-residents

The TEAC emphasized that rental income derived from property located in Spain is taxable — whether collected or not — for both resident and non-resident landlords.

This interpretation is based on Article 13.1.g) of the Consolidated Text of the Non-Resident Income Tax Law (TRLIRNR), which classifies rental income from Spanish property as income obtained in Spain. Furthermore, Article 24.1 establishes that the taxable base must be calculated on the gross amount of such income, following the same rules that apply under the Personal Income Tax Law (IRPF).

Under Article 22 of the IRPF Law (Law 35/2006), rental income is defined as income from real estate capital and must be declared when it becomes due, even if unpaid. Likewise, Article 14 states that income is attributed to the tax period in which it becomes payable, meaning that the right to collect outweighs actual collection for tax purposes.

The TEAC also clarified that the case did not involve rent pending judicial resolution, but amounts already due and enforceable, regardless of the tenant’s failure to pay.

Supreme Court doctrine: unpaid rent must still be reported

To reinforce its reasoning, the TEAC cited the Supreme Court Judgment 1467/2021 (December 14, 2021), which ruled that rental income subject to eviction proceedings for non-payment must be declared in the fiscal year when it becomes due, not when it is actually received.

The TEAC stressed that this doctrine also applies to non-resident landlords, who must declare accrued income from properties located in Spain even if the rent has not been collected.

Key difference: resident vs. non-resident taxation

The main distinction lies in the applicable tax regime. Spanish residents declare rental income through the IRPF, while non-residents must do so via the IRNR.

However, non-residents who live outside the European Union or the European Economic Area (EEA) — such as in Switzerland or the United Kingdom — cannot apply the same deductions available to EU/EEA residents. As a result, they are taxed on the full amount of the unpaid rent, which can increase their overall tax burden.

Consequences of not declaring unpaid rent

Failing to declare these amounts can lead to serious consequences. The Tax Agency may treat it as an omission of income, resulting in a supplementary assessment, along with surcharges, interest, and penalties.

When and how unpaid rent can be deducted

Under Article 23.1.a) of the IRPF Law, landlords can deduct so-called “bad debts” (saldos de dudoso cobro) — amounts owed but unlikely to be collected. This deduction applies to Spanish residents and to non-residents living in EU or EEA countries (per Article 24.6 TRLIRNR).

For non-residents outside the EU/EEA, this deduction cannot be applied.

A debt is considered “doubtful” when the tenant has been declared insolvent or when more than six months have passed since the first collection attempt without payment, as defined in Article 13.e) of the IRPF Regulations. If the landlord eventually receives payment, the amount must be declared as income in the year it is collected.

Declaring unpaid rent: a nuanced obligation

In conclusion, the TEAC’s decision reaffirms a clear rule: rental income must be declared whenever it is enforceable, regardless of whether it has been paid.

However, not all landlords are treated equally.

While Spanish residents and EU/EEA non-residents can deduct uncollectible rent or claim tax refunds, landlords residing in third countries must declare the full amount of the unpaid rent, even if it is never received.