If you are taxed in Germany
Germany and Spain exempt the Spanish property income from German tax, but keep it in the calculation of your German rate. The effect is subtle and it catches people out.
Exemption with progression
Under the German–Spanish treaty of 2011, income from immovable property is taxed where the property is — Spain. Germany exempts it, but applies Progressionsvorbehalt: the exempt Spanish income still counts when your German tax rate is worked out, so a profitable Mallorca rental can lift the rate on your German income. The property itself is declared in Germany; the Spanish tax is not credited, because the income is exempt in the first place.
What you actually declare
While you own it
- No German property tax on the Spanish house itself.
- Spanish imputed income tax and IBI are paid in Spain and stay there.
- Ownership through a Spanish S.L. has consequences under the German CFC rules — take advice before you structure, not after.
If you rent it out
- Rental profit is taxed in Spain at 19 % with costs deductible, as an EU resident.
- Germany exempts it but counts it under Progressionsvorbehalt in Anlage AUS.
- German depreciation rules do not apply to the Spanish computation — two sets of books, one property.
When you sell
- The gain is taxed in Spain at 19 %.
- Germany exempts the gain under the treaty, subject to progression.
- The German ten-year speculation period is not the deciding factor here — the treaty is.
Five questions for your own adviser
How much will Progressionsvorbehalt actually move my German rate?
Do I hold this personally, jointly, or through a company — and what do the CFC rules say?
Which German forms carry a Spanish property and its income?
How are the Spanish and German depreciation and cost rules reconciled?
Does my German inheritance planning work with a Spanish asset in it?