Sean Woolley is the founder and director of actual property company Cloud 9 Spain.
The low down on the brand new court docket ruling re Non-EU property homeowners having the ability to deduct quick time period rental bills from the earnings earned on their property in Spain.
There was a current court docket ruling in Spain to permit non-EU (non-EEA) property homeowners to deduct bills from their rental earnings — successfully permitting taxation on web earnings reasonably than gross — the place beforehand that was disallowed.
What was the previous regime for homeowners of properties in Spain from outdoors the EU, who usually are not residents?
Underneath Spain’s guidelines concerning earnings for non-residents (IRNR, declared by way of Modelo 210), the same old strategy was:
- In case you are a non-resident and usually are not an EU/EEA resident, your rental earnings from Spanish property was taxed at a flat fee of 24% on gross rental earnings (i.e. earlier than bills).
- You weren’t permitted to deduct bills (repairs, insurance coverage, mortgage curiosity, administration charges, and many others.) in opposition to that rental earnings.
- In contrast, EU/EEA resident non-residents (i.e. EU/EEA nationals residing outdoors Spain) have been taxed at 19% on rental earnings, and have been allowed deductions for bills attributable to the rental.
Thus, non-EU homeowners confronted a much less beneficial remedy (larger fee, no deductions) in comparison with EU/EEA homeowners, which many seen as discriminatory.
What’s the current change (court docket ruling) and what does it enable?
In August 2025, Spain’s Audiencia Nacional (Nationwide Court docket) issued a key ruling (Case 636/2021, 28 July 2025) that challenges the older follow of denying expense deductions to non-EU homeowners.
The Court docket held that denying non-EU landlords from deducting actual, needed bills is discriminatory and violates EU legislation, particularly Article 63 of the Treaty on the Functioning of the European Union (TFEU), which prohibits obstacles to free motion of capital.
They acknowledged that consequently, non-EU property homeowners in Spain needs to be allowed to deduct the identical sorts of bills that EU/EEA non-residents can (upkeep, repairs, property taxes, insurance coverage, mortgage curiosity, administration charges, utilities tied to the rental, and many others.) when submitting Modelo 210.
Due to this fact, taxation needs to be (or no less than can be) on web earnings (gross minus allowable bills) reasonably than on gross earnings alone.
The ruling additionally opens the door for claiming refunds (rectification) for overpaid taxes in prior years (sometimes as much as 4 years again, relying on statute of limitations) the place a non-EU proprietor paid tax on gross earnings with out deductions.
What the ruling does not (but) change:
It doesn’t (but) change the flat 24% fee for non-EU non-residents. So, even with deductions, a non-EU proprietor should be taxed at 24% on web earnings (i.e. you subtract bills, then apply 24%).
Nor does it mandate that non-EU homeowners be taxed at 19%, which stays the speed for EU/EEA non-residents. Some commentators anticipate that to be challenged in future instances.
You will need to notice that this can be a judicial choice, not a legislative change. The Spanish tax authorities (Agencia Tributaria) would wish to regulate their practices and administrative guidelines over time. The ruling’s scope and interpretation could have limitations (e.g. what constitutes permissible bills, documentation, and many others.). So, it isn’t a brand new legislation handed by Parliament, however a robust court docket precedent that forces (or encourages) the tax authorities to alter their remedy, particularly for disputes and refund claims.
Implications & sensible steps for property homeowners
Given this ruling, right here’s what non-EU property homeowners ought to know and take into account:
File future returns
If you file your Modelo 210 for upcoming years, embody deductions for all professional rental bills (with correct invoices) reasonably than declaring gross earnings solely.
Doc completely
Be sure you have full data: invoices, contracts, receipts, proof of funds, documentation tying the expense to the rental utilization. The tax authorities will scrutinize them.
Apply for refunds / rectify prior years
You’ll be able to request “rectification” of previous Modelo 210 returns (as much as 4 years, topic to statute of limitations) to assert refunds for deductions that have been wrongly denied.
Monitor administrative response
If the tax authority resists making use of deductions for non-EU homeowners or rejects refund claims, additional authorized problem or attraction could also be wanted.
Examine your nation treaty
In some instances, a double taxation treaty together with your nation of residence could have an effect on how a lot tax is in the end owed or creditable.
Search tax & authorized recommendation
As a result of this can be a comparatively new growth and implementation could fluctuate, skilled recommendation from a Spanish tax lawyer or advisor is extremely really useful.
