Non-EU Residents Can Now Deduct Expenses on Rental Income in Spain

The Spanish National Court has taken a historic step in international taxation. In its judgment of 28 July 2025, the Court recognized that non-EU and non-EEA tax residents with property in Spain are entitled to deduct expenses associated with rental income, aligning their treatment with that already available to EU/EEA residents.

The Previous Regime: Clear Discrimination

Until now, Article 24 of the Spanish Non-Resident Income Tax Law (IRNR) required non-EU taxpayers to pay tax on their gross rental income in Spain, without deducting expenses such as property tax, community fees, repairs, insurance, interest, or depreciation.

In contrast, EU/EEA residents could deduct these expenses and were taxed only on their net rental income.

This difference created discriminatory treatment, which the National Court declared contrary to:

• The principle of free movement of capital under Article 63 of the Treaty on the Functioning of the EU.
• The non-discrimination clauses included in most double tax treaties signed by Spain.

The National Court’s Decision

The Court concluded that denying expense deductions to non-EU taxpayers infringes both EU law and international treaties.

The ruling builds on case law from the Court of Justice of the EU and the Spanish Supreme Court, which had already eliminated similar discrimination in other taxes, such as Inheritance and Gift Tax.

Implications for Non-EU Property Owners

• Apply deductions for expenses in their IRNR tax returns.
• Rectify tax returns filed in the past four years to claim refunds of overpaid taxes.

What to Expect Going Forward

The State Attorney will likely appeal the judgment before the Supreme Court. Meanwhile, taxpayers can already file refund claims to defend their rights.

Key Considerations

• The Spanish Tax Authorities do not always apply criteria established by rulings that are not from the Supreme Court, which may require administrative or judicial appeals.
• If a refund is granted in Spain, taxpayers must regularize their situation in their country of residence under local tax rules and applicable treaties.

Conclusion

This judgment is a major step forward for thousands of non-EU taxpayers with rental properties in Spain, eliminating a long-standing discriminatory tax treatment.

Expert Tax Advice

At Tax&Law Consulting, we can help you analyze your case, identify deductible expenses, and file requests to rectify past returns to recover overpaid taxes.