A Major Win for Non-EU Property Owners in Spain
In a groundbreaking decision issued on 28 July 2025, Spain’s National Court (Audiencia Nacional) has recognized, for the first time, the right of non-EU and non-EEA taxpayers to deduct expenses directly related to their Spanish-sourced income under the Non-Resident Income Tax (IRNR) regime.
This judgment aligns non-EU taxpayers with their EU and EEA counterparts, who have long been entitled to deduct costs such as maintenance, mortgage, insurance, and amortization from rental income.
Until now, Article 24.1 of the IRNR Law required non-EU taxpayers to pay tax on their gross income, without any deduction for related expenses, a clear case of discrimination under EU law.
The Court relied on the Court of Justice of the European Union (CJEU)’s consistent case law on the free movement of capital (Article 63 of the Treaty of the European Union). In particular, the National Court referenced the CJEU’s decision of 12 October 2023, which invalidated similar restrictions in inheritance and gift taxation.
By extending this principle to the Income Tax for Non-Residents, the National Court ruled that Spain’s limitation of deductions for non-EU residents violates EU law and must be corrected.
What This Means for Non-EU Taxpayers
This decision opens the door for thousands of non-EU taxpayers, especially property owners, to request tax refunds for overpaid amounts. Eligible taxpayers may:
- Deduct all expenses directly related to their Spanish income (property maintenance, insurance, depreciation, etc.).
- File rectification requests (rectificación de autoliquidación) for prior tax forms filed on a gross-income basis within the last four years.
However, the State Attorney is expected to appeal to the Spanish Supreme Court, which may refer the case to the CJEU for a final ruling. Until then, affected taxpayers should act promptly to protect their rights.
Our recommendation:
For non-EU taxpayers filing IRNR (Form 210):
- Review prior filings and assess whether deductible expenses were excluded.
- Submit correction requests for eligible years to recover overpaid tax (subject to a 4-year statute of limitations).
- For new filings, consider declaring income on a gross basis and filing a correction later, pending final confirmation from higher courts.
While further litigation may follow, the window of opportunity for refund claims is already open. Non-EU taxpayers should act swiftly, supported by professional tax advice, to ensure compliance and recover potential overpayments.
Other controversial issues remain unresolved by the Spanish courts, such as whether non-resident taxpayers may apply the long-term rental reduction; and the possible reduction to 19% tax rate applicable to Spaniards or Europeans. Further clarification from the courts and tax authorities is expected in the coming months.
Our Law Firm can assist you throughout the process to recover overpaid taxes and ensure that your filings comply with the latest developments.
Best Regards.
