Renting Out Property Abroad: How Non-Residents Are Taxed

A non-resident who rents out real estate in a foreign country usually faces one of two mechanics: gross-basis withholding, where the tenant or a paying agent remits a flat rate on the whole rent with no expense deductions, or a net-basis election, where the landlord files a return in the source country, deducts operating costs, and pays tax on the net profit. Which mechanic applies — and whether the landlord can choose between them — is driven by two variables: the landlord's residence (EU/EEA or third-country), and the source country's domestic non-resident regime. On top of that, the residence country almost always taxes the same rental income again and issues a credit for foreign tax paid. Treaty rules do not eliminate the double touch; they only allocate primary taxing rights and set the ceiling on how much the source state can collect.

This article covers the mechanics for three of the most common source jurisdictions for international landlords — Portugal, Spain, and France — with a focus on the gross-versus-net choice, the deductible-expense list, the dual reporting timeline, and how Article 6 of the OECD Model treaty routes the income. It is research, not tax advice; non-resident rental filings turn on facts specific to the property, the landlord's residence, and the treaty in force, and any real filing should be structured with a local adviser as of 2026.

The default rule: source-state taxation of immovable property

Under Article 6 of the OECD Model Tax Convention, income from immovable property may be taxed in the country where the property is situated. That is a permissive rule — the source state gets primary taxing rights but is not obliged to tax at any particular rate, and the residence state is not required to give up its own claim. Almost every modern double-tax treaty follows this pattern, and the vast majority of the 3,000-plus bilateral treaties in force worldwide adopt the OECD or UN wording verbatim. The residence state relieves double taxation either by exempting the foreign rental income (the exemption method) or by taxing it and crediting the foreign tax paid (the credit method). Which method applies depends on the specific treaty.

The practical consequence is that a landlord almost always files twice: once in the source country as a non-resident under that country's non-resident income tax regime, and once in the residence country as a resident on worldwide income. Neither filing removes the need for the other. The double taxation treaties guide walks through the mechanics of credit versus exemption in more depth.

Immovable-property income is defined broadly. It captures rental income from residential and commercial property, ground rents, and typically income from timeshare-style structures and holiday-let arrangements above a de minimis. Gains on disposal of the same property fall under Article 13(1) and are also taxed in the source state — but that is a different filing event, not the same one.

Gross withholding versus net-basis election: the core choice

Source countries administer non-resident rental tax in one of two ways.

Gross withholding

The tenant, letting agent, or property manager withholds a flat percentage of the rent and remits it to the tax authority. No expenses are deductible. The landlord's compliance obligation is minimal — often a confirmatory annual filing rather than a full return. The cash cost is high because the base is gross rent, not net profit; the effective tax on a modestly-yielding rental after mortgage interest, management fees, insurance, and repairs can easily exceed 100% of true economic profit.

Net-basis election or regime

The landlord files a full non-resident income tax return in the source country, declares gross rent, deducts qualifying expenses, and pays tax on the resulting net profit. Compliance overhead is higher — the landlord typically needs a local fiscal representative or accountant, must keep documentary support for every expense claimed, and must file to a source-country deadline. The economic result is materially better, because tax attaches only to profit.

Which regime applies depends on the interaction of the landlord's residence and the source country's domestic law. EU and EEA landlords generally have access to net-basis treatment on the strength of the EU freedoms — the Court of Justice has struck down several member-state rules that denied non-resident EU landlords the same expense deductions as residents, on the basis that the discrimination breached the free movement of capital. Landlords resident outside the EU/EEA are often restricted to gross withholding, or to a narrower net-basis election with fewer deductible categories. For general context on how withholding regimes interact with residence-country credits, see the withholding taxes guide.

Portugal: non-resident rental income (categoria F)

Portugal treats rental income as Category F income for personal income tax (IRS) purposes. For non-resident landlords the default treatment is a flat rate on net rental income — the deduction posture is generous by regional standards, but the rate is not preferential.

As of 2026, Portuguese-source rental income for non-residents is taxed at a flat 25% on the net (after allowable deductions), with expense categories that broadly track those available to Portuguese residents:

• Property maintenance and conservation costs
• IMI (annual municipal property tax) and AIMI (the wealth-style surcharge on high-value portfolios) attributable to the property
• Insurance premiums on the property
• Condominium fees
• Depreciation is not directly deductible against Category F rental income under the standard regime

Mortgage interest is typically not deductible against Category F income for individuals under the standard regime — a point that surprises landlords used to jurisdictions where interest is the largest single deduction. Landlords structured as sole traders on Category B (business income) elect a different mechanic and can deduct a broader expense list, but that is a distinct regime with its own registration and VAT consequences.

Portuguese non-resident landlords must appoint a fiscal representative resident in Portugal unless they are resident in an EU/EEA state with a mutual assistance agreement. The representative is the point of contact with the Autoridade Tributária, receives notices, and can be held jointly liable for filing failures. The annual IRS return (Modelo 3) is filed between 1 April and 30 June for the prior calendar year.

Portugal's headline personal rates run from 14.5% to 48% on progressive scales for residents, with a 2.5-5% solidarity surcharge on high incomes. Those progressive rates are not the default for non-resident rental income — the 25% flat rate is — but they matter when non-residents elect the progressive scale, which is available in defined circumstances and can be advantageous where total Portuguese-source income is modest. Portugal has no general wealth tax, though AIMI attaches to portfolios of Portuguese residential property above threshold.

The IFICI regime that replaced NHR from 2024 does not change the non-resident rental picture — a landlord who becomes Portuguese tax resident under IFICI is taxed as a resident on worldwide income, subject to the 20% flat rate for qualifying activities only. The rental treatment for actual non-residents is separate and unaffected. Background on the successor regime is in the Portugal NHR 2.0 / IFICI guide.

Spain: the EU/EEA versus third-country split

Spain administers non-resident tax through a separate statute — the Impuesto sobre la Renta de no Residentes, or IRNR — that runs alongside the resident personal income tax. Non-resident rental income sits within IRNR, and Spain draws a sharp line between EU/EEA landlords and everyone else.

EU/EEA-resident landlords

Landlords resident in another EU or EEA member state are taxed at 19% on net rental income. The deductible-expense list is essentially the same one available to Spanish residents on their rendimientos del capital inmobiliario:

• Mortgage interest attributable to the acquisition of the property
• IBI (municipal property tax) and other local levies
• Community fees and building insurance
• Repair and maintenance costs (not improvements, which capitalise)
• Depreciation at 3% per year on the construction value (land is not depreciable)
• Property management and letting-agent fees
• Legal and accountancy costs specifically attributable to the property

The reduction available to residents who rent to long-term primary-home tenants (historically 60%, reworked in the 2024 housing law to a variable rate depending on tenancy characteristics and location) is available to non-resident EU/EEA landlords on the same terms.

Non-EU/EEA-resident landlords

Landlords resident outside the EU and EEA — including the United Kingdom since 2021, the United States, the Gulf states, and most of Asia — face a materially harsher regime. The rate is 24% on gross rental income, with no expense deductions permitted. Mortgage interest, community fees, repairs, insurance, depreciation, and management costs are all disregarded. The effective tax on a leveraged Spanish rental owned from London or New York can easily exceed the true economic yield.

The 24% gross rule is one of the most economically punishing non-resident regimes in the EU for landlords outside the freedoms, and it is the single most cited reason for non-EU landlords to structure Spanish rentals through Spanish resident companies (paying corporate tax on net profit at 25%) or through EU-resident holding structures. Neither restructuring is free of substance requirements or transfer-pricing exposure, and both should be modelled with a Spanish adviser before implementation.

Filing mechanics

Non-resident landlords in Spain file Modelo 210. For property let to a tenant with income, the filing is quarterly (within the first 20 days of the month following each calendar quarter) on the income received in that quarter. For property held vacant or for own use, imputed income under the IRNR imputed-income rule is declared annually. Fiscal representatives are not universally required for EU/EEA landlords but are advisable in practice and mandatory for landlords resident in jurisdictions the Spanish tax authority classifies as non-cooperative.

Non-resident landlords are not subject to Spanish wealth tax on Spanish real estate above the general resident thresholds under the same rules as residents; regional bonificaciones effectively eliminate the wealth tax in Madrid and Andalusia for most portfolios, and the temporary solidarity tax on net assets above €3M has been extended through 2026. For Spanish-resident inbounds under the Beckham regime, the calculus differs — the Beckham Law guide covers that path separately.

France: minimum rate, social charges, and the micro-foncier option

France taxes non-residents on French-source rental income under the same personal income tax scale as residents, subject to a floor. The minimum rate for non-residents, historically 20% up to a threshold and 30% above it, applies unless the taxpayer demonstrates that their global effective French rate would be lower — in which case the lower actual rate applies. That safeguard is the point at which many non-resident landlords file a full French return: to substitute their true progressive rate for the minimum.

Two French-source charges stack on the income tax:

• Prélèvements sociaux at 17.2% on investment and rental income, per the data in the France profile. EU/EEA-resident landlords covered by another member state's social security system benefit from a reduced 7.5% prélèvement de solidarité in place of the full 17.2%, following the CJEU's de Ruyter line of decisions.
• Local property taxes on the property itself — taxe foncière is annual, at the landlord's account regardless of tenancy.

France offers two rental regimes for unfurnished long-term lets:

Micro-foncier

Available where gross rental income is below €15,000 per year. A flat 30% expense allowance is applied automatically, and 70% of gross rent is taxable. No documentation of specific expenses is required. Simple, but structurally worse than the real regime for any landlord whose true expenses exceed 30% of gross rent — which, for a mortgaged property, is almost every landlord.

Régime réel

Available by election, and mandatory above the micro-foncier ceiling. Actual expenses are deducted. The categories track the standard deductible list:

• Mortgage interest on the acquisition loan
• Repair, maintenance and conservation works (improvements capitalise)
• Property management fees and letting-agent commissions
• Insurance premiums
• Taxe foncière
• Co-ownership charges

Losses under the régime réel can be carried forward against future rental income for ten years; interest-related losses have their own carry-forward rules. Furnished rentals (LMNP / LMP) sit under a different regime, with depreciation of the building and furniture available, and are outside the scope of this article.

France's IFI wealth tax on real estate applies to non-residents' French-situs real estate above €1.3M in net value, at rates from 0.5% to 1.5%. That is a separate annual event from rental income tax and is worth modelling for high-value portfolios; the general wealth-tax landscape is covered in wealth taxes by country.

Comparing the three regimes

Dual reporting: source and residence country

Filing in the source country is only half of the compliance picture. The residence country almost always taxes the same rental income again under its worldwide-income rule and credits the foreign tax paid.

Three dual-reporting patterns dominate in practice:

1. Credit method. The residence state includes foreign rental income in taxable income, calculates domestic tax on it, and allows a credit for the foreign tax paid, capped at the domestic tax attributable to that income. Any excess foreign tax is lost unless carried forward under domestic law. This is the default under the US treaty network and under most modern OECD-based treaties.
2. Exemption method (with progression). The residence state exempts the foreign rental income from its own tax but includes it in the progression calculation for other income. This raises the effective rate on the taxpayer's remaining domestic income but leaves the rental itself untaxed at home. Older treaties and several continental European partners default to this method for immovable-property income.
3. Territorial residence. Where the residence state is itself territorial (Panama, Paraguay, Georgia in relevant scenarios, and others on the territorial countries list), foreign rental income is simply outside its tax base. The source country's tax is the whole story.

Reporting timelines rarely align. Portugal's Modelo 3 window (April to June) does not match the US 1040 window (April, plus extensions), the UK Self Assessment window (January), or Germany's Einkommensteuererklärung window (July). The practical consequence is that landlords typically pay source-country tax first, then claim the credit in the residence country — sometimes triggering a residence-country amended return if the source-country liability is finalised only after the residence-country deadline.

Automatic exchange of information under the Common Reporting Standard adds a further layer: source-country tax authorities routinely share rental-income data with residence-country authorities, closing the gap for landlords who might otherwise have filed only in the source jurisdiction. The CRS explainer covers the mechanics.

Where the article-6 rule can bite unexpectedly

Two treaty interactions catch non-resident landlords more often than the base mechanics suggest.

First, the OECD Model treats the disposal of a property-rich company — a company whose value derives principally from immovable property in the source state — the same way as a direct disposal of the property. Article 13(4) preserves source-country taxing rights on the sale of shares in such companies. A landlord holding French real estate through a French SCI, or Spanish real estate through a Spanish SL, cannot generally escape source-country capital-gains tax by selling the shares instead of the building.

Second, treaty tie-breakers do not overturn Article 6. Even where a landlord's residence is contested — dual claims resolved by the tie-breaker rule — the immovable-property article routes the rental income to the source state regardless of which side of the tie-breaker prevails. Tie-breaker analysis affects worldwide-income exposure and exit-tax triggers but not source-country rental tax. The residency framework guide covers where the tie-breaker actually moves the needle.

Practical implications

A handful of patterns emerge for a landlord planning a cross-border rental.

EU/EEA residence is worth real money on Spanish and French property. The 19% net rate in Spain versus 24% gross for third-country landlords is a step change in economics on any mortgaged property. The 7.5% versus 17.2% French social charges swing is smaller in headline terms but material on cash yield.

Portugal's Category F treatment penalises leveraged landlords. The absence of mortgage-interest deduction on unfurnished long-term rentals under the standard regime pushes some landlords toward Category B sole-trader structures or corporate ownership — both with their own complications and tax posture.

Fiscal representation is not optional in practice. Even where domestic law formally requires it only for non-EU/EEA landlords, tax-authority communications, quarterly filing deadlines, and property-specific documentation make a local point of contact effectively necessary. Costs run from a few hundred to a few thousand euros per year depending on portfolio size.

The residence country's method matters as much as the source country's rate. A US landlord using the foreign tax credit will absorb the full source-country tax as a credit against US tax on the same income, subject to basketing rules. A UK landlord under the current rules will similarly credit foreign tax. A German landlord under the exemption-with-progression method neither pays German tax on the rental nor credits the foreign tax — the source country's rate is the final answer, and the German progression bump on other income is the residual cost.

Where to go next

For the underlying mechanics, see the TaxAtlas guides on withholding taxes, double taxation treaties, and how tax residency works. For country-specific data, review the Portugal profile, Spain profile, and France profile, or run a side-by-side on the compare tool. Related reading includes the Beckham Law guide for Spanish inbound-resident treatment, the Portugal IFICI regime for those considering a move to Portuguese residence, and wealth taxes by country for the annual-holding-cost layer. General cross-border residency questions are covered in the FAQ.