The Spanish National Court has marked a turning point in the taxation of non-EU non-residents who own rented properties in Spain. In its ruling of July 28, 2025, the court declared that the prohibition on deducting expenses in the Non-Resident Income Tax (IRNR) violates the free movement of capital enshrined in Article 63 of the Treaty on the Functioning of the European Union.
Until now, property owners residing outside the EU or EEA were not allowed to apply deductions for expenses related to their rental activity, unlike EU residents. The ruling opens the door for these taxpayers to claim deductions for items such as property depreciation, community fees, repairs, taxes, or insurance, among others. This represents a significant step toward equal treatment and greater legal certainty in the Spanish tax system.
However, the decision does not settle all pending issues. Significant differences remain, such as the applicable tax rate (24% compared to 19% for EU residents) and the 50% reduction on residential rental income. Moreover, as this is a ruling that is likely to be appealed, the final word will rest with the Supreme Court. Taxpayers are therefore advised to proceed with caution and keep claims open for non-prescribed years in order to benefit from a potential favorable Supreme Court decision.
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