Landmark 2025 Tax Ruling: Non-EU Owners in Spain Can Now Deduct Rental Expenses

If you own a rental property in Spain and live outside the EU/EEA, an important legal development may significantly reduce your tax burden. A new ruling by Spain’s National High Court confirms that non-EU owners can deduct rental expenses from their rental income, something previously reserved only for EU/EEA residents.

What Happened?

On 28 July 2025, the Spanish Audiencia Nacional (National High Court) issued a landmark decision (Case 636/2021), ruling that non-EU/EEA non-residents renting out property in Spain must be allowed to deduct rental-related expenses just like EU/EEA residents.

These expenses may include:

• Maintenance and repairs
• Insurance premiums
• Community fees
• Local taxes (IBI, basura, etc.)
• Property management costs
• Mortgage interest

This marks a significant shift in the way Spain applies its Non-Resident Income Tax (IRNR).

Why This Is Important

Before this ruling:

• EU/EEA owners were taxed at 19% on net income, after deducting expenses.
• Non-EU owners were taxed at 24% on gross income, with no deduction rights.

The court found this unequal treatment discriminatory under European free-movement-of-capital rules. As a result, non-EU owners now have substantial legal grounds to deduct legitimate rental expenses.

Does This Change the Tax Rate?

No — the ruling only affects expense deductions. The tax rate for non-EU owners remains 24% for now. Any change to the rate would require additional legislation or court decisions.

Can You Claim Refunds for Past Years?

Yes. If you were taxed on gross income during the last few years, you may be able to reclaim overpaid tax. Spanish tax law generally allows rectification for the previous four years (subject to individual filing dates).

This could represent significant savings, particularly for high-expense properties.

What You Should Do Now

1. Gather invoices and receipts for all rental-related expenses.
2. Review your next Modelo 210 filing to determine whether deductions should now be included.
3. Evaluate past filings for potential refund claims.
4. Seek professional tax advice to ensure filings are compliant during this transition period.
5. Monitor updates: The Spanish Tax Agency (AEAT) has not yet updated the form or its official guidance so that implementation may evolve.

Why This Matters for Prestige Villas Owners

Many of our non-EU owners rely on rental income from their properties. This ruling may reduce your annual tax liability and even open the door to recovering overpaid tax from previous years.

We are closely monitoring developments and can coordinate with your tax advisor to ensure you benefit fully and correctly from these changes.

Final Note

This ruling is a major step toward fairer taxation for non-EU property owners in Spain. While the administrative side is still catching up, the legal foundation is now strong.

If you would like assistance reviewing your expenses, rental records, or past tax filings, please get in touch with us.

Disclaimer: This article is for general information only and does not constitute legal or tax advice. Always consult a qualified Spanish tax advisor regarding your specific situation.