Real estate investment in Spain by non-residents has become increasingly important in recent years. Many owners opt for contractual formulas that allow them to profit from their properties without giving up the possibility of a future sale. One of the most commonly used is the transfer of use with option to purchase, a concept that combines leasing with the transferee’s right to purchase the property within a specified period. In this article, we take an in-depth look at how income from this type of contract is taxed and what is involved in filing Form 210, in accordance with the provisions of the Directorate-General for Taxation (DGT) in its Binding Ruling V1141-24.
The transfer of use with option to purchase consists of a contract whereby the owner of a property transfers its use to a third party, usually through a lease, also granting them the right to purchase it in the future. This right can be exercised within a specified period and under previously agreed conditions. During the transfer period, the transferee pays a periodic rent for the use of the property. Additionally, they may pay an initial amount—known as an option premium—which guarantees them the right to purchase the property in the future. This premium, although not constituting periodic rent, has direct tax relevance.
When the owner of the property is not a tax resident in Spain, the income obtained from the transfer of use of a property located in Spanish territory is considered income obtained in Spain. Therefore, it is subject to Non-Resident Income Tax (IRNR). This includes both the periodic income derived from the use of the property, which is considered real estate capital gains, and the amount received for granting the option to purchase, which is considered a capital gain. Both types of income must be declared using Form 210, although with different deadlines and criteria.
The amount received for granting the right of first refusal cannot be considered a simple advance on the sale price. It is a change in assets that generates a gain for the owner and, as such, must be taxed in Spain. The capital gain is determined as the difference between the amount received for the right of first refusal and the expenses and taxes paid by the owner in relation to said concession. The non-resident owner must file Form 210 within one month of the date on which the amount is received. This declaration is made as a capital gain obtained without the mediation of a permanent establishment. The applicable tax rate is 19% for residents of European Union countries, Iceland, or Norway, and 24% for residents of other countries.
If the transferee decides to exercise their right and the sale is formalized, the non-resident owner generates a second capital gain, this time from the transfer of the property. This transaction must also be declared using Form 210. The capital gain is calculated as the difference between the transfer value—that is, the agreed sale price, which may include periodic rents and the option premium if they have been deducted from the price—and the acquisition value, which includes the original purchase price of the property, acquisition costs (notary, registration, taxes), and any investments and improvements made. The declaration must be made within three months of the end of the month in which the sale is formalized.
If the option premium has already been declared as a capital gain at the time of its granting, and this is included in the sale price, it is essential to avoid double taxation on the same amount. To do this, it is recommended to subtract the amount already declared from the transfer value and provide a copy of Form 210 previously submitted for the option premium.
In order to correctly comply with the tax obligations arising from this type of contract, it is essential to properly identify each type of income, file Form 210 within the established deadlines, keep all contractual documentation, and consult the double taxation agreements between Spain and the owner’s country of residence. Leasing with an option to purchase is an effective tool for making real estate in Spain profitable, but proper tax management is key to avoiding penalties, errors, or double taxation. Both the option premium and the subsequent sale generate tax obligations that must be met with precision. Having expert advice and drafting contracts clearly can make the difference between a profitable transaction and an unexpected tax burden.
Teresa Romero Navas