🏠 11-Month Rental or Long-Term Lease? Taxation and Risks for Property Owners in Spain
If you own a property for rent or are thinking about putting one on the market, you’re probably asking yourself:
Is it better to sign an 11-month contract or opt for a long-term lease?
Beyond the length of the contract, there are two key factors that every landlord in Spain should consider: taxation and the risk of squatting. Let’s look at why.
✅ Taxation: Which Option Means Lower Taxes?
The big difference between a long-term rental contract and an 11-month contract lies in how rental income is taxed.
🔹 Long-term lease (main residence)
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A lease is considered for the tenant’s main residence if they live there permanently.
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You’re entitled to a 50% reduction on the net rental income (as of 2024; before, it was 60%).
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This means that after deducting expenses (property tax, community fees, insurance, repairs), only half the net profit is subject to income tax (IRPF).
✅ Advantage: you pay less tax and keep more of your rental income.
🔹 11-month contract or short-term rental
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Even though it’s nearly a year, an 11-month contract is considered a seasonal rental, not a long-term residential lease.
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The 50% tax reduction does NOT apply.
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You pay income tax on 100% of the net rental income.
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If it’s a tourist rental, you may also face additional licensing requirements and stricter regulations.
⚠️ Drawback: you pay more tax and keep less net profit.
📊 Real Example: €2,300 Monthly Rent
Let’s say you rent out your apartment for €2,300 per month (€27,600 per year) and have deductible expenses of 20% (€5,520):
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Long-term lease (main residence):
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Net income after expenses: €22,080
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50% reduction applies → taxable base: €11,040
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IRPF (37%): €4,084.80
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11-month contract (seasonal rental):
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Net income after expenses: €22,080
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No reduction → taxable base: €22,080
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IRPF (37%): €8,169.60
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➡️ Difference: With a long-term contract, you’d pay €4,084.80 less in taxes.
⚠️ What About the Risk of Squatting?
Here’s the other big fear for landlords in Spain.
🔹 Long-term lease
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If the tenant stops paying, you’ll need to initiate an eviction process through court.
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This can take between 4 and 9 months, depending on the court’s workload.
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However, with a signed lease, the legal process is clearer, and you have documented proof of your right to recover the property.
🔹 11-month contract
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Many landlords think signing 11-month contracts gives them more flexibility to remove tenants quickly. But that’s not always true.
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If the tenant can prove the property is their main residence, they may claim rights under residential tenancy laws, even if the contract says “seasonal.”
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The legal eviction process is the same as for long-term contracts if there’s non-payment.
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If the tenant refuses to leave, you’ll still have to go to court.
🔹 Illegal squatting (okupas)
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If someone enters your property without a contract or your permission, that’s illegal squatting.
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If you act fast (within the first 48 hours), the police can evict squatters without a court order, as it’s considered unlawful entry.
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If they register themselves at the address or prove they’re living there, the legal process becomes much more complicated and lengthy.
🎯 So… What’s the Best Option?
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From a tax perspective, long-term rentals are far more profitable thanks to the 50% reduction.
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Legally, a well-drafted lease with proper safeguards (deposit, rent default insurance, thorough tenant screening) is usually safer.
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An 11-month contract does not automatically protect you more against non-paying tenants or guarantee a faster eviction.
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Plus, taxes are significantly higher for seasonal contracts.
✅ Recommendations for Property Owners
✔ Think through your strategy: Do you prefer higher net returns or flexibility?
✔ Screen tenants carefully.
✔ Consider rent default insurance for long-term leases.
✔ If choosing tourist rentals, research local regulations and licensing.
✔ Always consult a tax advisor or lawyer specializing in property rentals.
In summary:
🔹 Long-term rental → Lower taxes and higher net profitability.
🔹 Short-term rental → Higher taxes, no extra legal protection.
🔹 Squatters → Quick action is essential, but no contract eliminates the risk completely.
If you’re considering renting out your property and want to optimize both taxation and security, make sure to seek professional advice to help you make the best decision!