We hope that all is well with you !
As you might have heard, there’s been a landmark Spanish court ruling which means that owners of Spanish property who are not EU-resident will now be able to claim a deduction for all rental-related expenditure in their annual rental income tax declaration (Modelo 210). Attached are some general details- please remember that these are for your general guidance only and not a substitute for proper professional advice.
There is also the possibility to make a back claim for every year up to four years previously, so that would mean that you can now make a claim back to FY 2021.
Note that the claim is for expenditure only, and the tax rate (for now) remains the same at 24%.
What the ruling means if you own property in Spain (as a non-EU resident)
Please feel free to contact us for further information or assistance !
Until now
- If you live outside the EU/EEA (for example, in the U.S., UK, Canada, Australia…), Spain has been taxing your gross rental income from Spanish property at 24%, without allowing you to deduct expenses like:
- mortgage interest
- repairs and maintenance
- local property taxes (IBI)
- insurance premiums
- management or agent fees
- By contrast, EU/EEA residents could deduct these expenses and only pay tax on their net rental income, at a lower 19% rate.
What the court decided
- The Spanish National Court (SAN 3630/2025, September 2025) ruled that denying deductions to non-EU residents is discriminatory.
- It violates:
- the EU principle of free movement of capital (Article 63 TFEU), and
- the non-discrimination clause in Spain’s tax treaties (for example, with the U.S.).
- Therefore, non-EU residents must also be allowed to deduct legitimate expenses against their Spanish rental income.
What changes for you
✅ You may now be able to file or amend returns to claim deductions for property-related costs.
✅ This could significantly reduce your taxable base, lowering your Spanish tax bill.
✅ If you overpaid in the past, you might claim a refund, as long as the year is still within the statute of limitations of 4 years.
What hasn’t changed
❌ The ruling does not change the 24% tax rate applied to non-EU residents. (EU/EEA residents continue at 19%.)
❌ The decision is not final yet. Spain’s Supreme Court may review it. Until then, the tax office may continue to deny deductions unless you appeal.
What you can do now
- Review your past Spanish non-resident returns (IRNR) — check if expenses were disallowed.
- Calculate potential refunds — work out whether it’s worth filing a rectification claim.
- Gather evidence of expenses — invoices, contracts, property tax bills, bank statements.
- Watch for further updates — the case could reach the Supreme Court.
In short: this ruling is a big step toward ending tax discrimination against non-EU property owners in Spain. While not yet final, it opens the door to deductions and possible refunds.
- The case involved a non-EU resident (a U.S. taxpayer) who owned a property in Spain and declared rental income under the Spanish Non-Resident Income Tax (IRNR). Under prevailing practice, non-EU residents were denied deductions for expenses associated with the rental property (repairs, interest, taxes, insurance, etc.)
- The taxpayer argued that this denial was discriminatory and violated both EU law (free movement of capital / non-discrimination) and the tax treaty between Spain and the United States.
- The National Court agreed. It held that the Spanish domestic rule excluding non-EU residents from expense deductions is incompatible with the principle of non-discrimination under EU law (notably Article 63 TFEU) and relevant treaty provisions (e.g. Article 25 of the Spain-U.S. tax treaty).
- Accordingly, the Court ruled that non-EU residents should be allowed to deduct expenses linked to rental property in Spain in the same manner as EU/EEA residents.
Key consequences & limitations
| Issue | What changes | Caveats / considerations |
|---|---|---|
| Deductibility of expenses | Non-EU (third-country) non-residents can deduct costs (repairs, interest, insurance, local taxes, management fees, etc.) when calculating taxable rental income under IRNR. | This is subject to appeal. The State may bring the case to the Supreme Court, so the ruling is not yet final. |
| Tax rate | The ruling does not automatically change the difference in tax rates. Non-EU residents currently pay a 24% flat rate on rental income, whereas EU/EEA residents benefit from a 19% rate on net income. | The decision deals only with deductions, not with equalizing rates. Any change in the rate would require further judicial or legislative action. |
| Refund / amendment of past returns | Affected taxpayers may seek to rectify past IRNR returns and claim refunds (for “undue payments”) for years still within the statute of limitations. | The possibility to recoup overpaid taxes depends on whether the statute of limitations has expired and the administrative tax authority’s acceptance. |
| Equal treatment / non-discrimination | This ruling is a step toward eliminating tax discrimination between EU and non-EU property owners, by aligning Spanish practice with EU law and treaty principles. | It may set a precedent, but full stability will depend on whether higher courts (Supreme Court) confirm it and whether Spanish tax law is adjusted accordingly. |
Please feel free to contact us for further information or assistance !