Landmark Tax Ruling: Non-EU Property Owners in Spain Can Finally Deduct Rental Expenses

A major court ruling in Spain has brought welcome news for thousands of non-EU landlords. On 28 July 2025, the Audiencia Nacional (Spain’s National High Court) issued a decision in Case 636/2021, confirming that property owners from outside the European Union are entitled to deduct rental-related expenses when paying Spanish Non-Resident Income Tax.

For many years, non-EU landlords renting out property in Spain were at a serious tax disadvantage compared to their EU and EEA counterparts. This judgment represents a significant breakthrough in leveling the playing field — and could have financial benefits for many expats who own holiday homes or investment properties across Spain.

A history of unequal treatment

Spain’s tax rules created a two-tier system for landlords:

• EU/EEA property owners: When renting out property, they were taxed at a 19% rate on net rental income. This meant they could deduct legitimate costs such as:
  
  • Community fees and service charges
  • Repairs and maintenance
  • Home insurance premiums
  • Mortgage interest
  • Professional fees (legal, management, accountancy, etc.)
• Non-EU property owners: They were subject to a 24% tax rate on gross rental income. Crucially, they were not allowed to claim any deductions. This meant if a landlord spent thousands on repairs, management, or even mortgage interest, none of it could be offset against tax.

This unequal system particularly affected owners from countries like the UK (post-Brexit), Switzerland, the United States, Canada, and Australia. Two landlords in the same building could face drastically different tax bills simply because of where they lived.

What the new ruling changes

The Audiencia Nacional found that preventing non-EU landlords from claiming expenses breaches Article 63 of the Treaty on the Functioning of the European Union (TFEU), which guarantees the free movement of capital.

In practical terms, this means:

• Non-EU landlords can now deduct legitimate property-related expenses when declaring their rental income in Spain.
• These deductions apply when filing the Modelo 210 (Non-Resident Income Tax return).

This represents a huge step forward, aligning the treatment of non-EU property owners more closely with that of EU/EEA residents.

Does the tax rate change as well?

At this stage, no. The 24% tax rate for non-EU landlords remains in place. The ruling specifically addresses deductions, not the applicable tax rate.

However, there are ongoing cases before Spanish and EU courts that could go further. These challenges may:

• Reduce the non-EU tax rate from 24% to 19%, in line with EU/EEA landlords.
• Potentially extend the 50–60% rental income reduction currently available to Spanish tax residents.

If those rulings succeed, non-EU landlords could see their tax burden decrease even more significantly in the coming years.

Can landlords reclaim overpaid taxes from the past?

Yes — and this is one of the most important parts of the ruling.

Non-EU landlords who have been paying tax under the old rules may be able to claim refunds for overpaid amounts. Spanish tax law allows for a four-year window to request corrections and refunds.

This means:

• If you filed Modelo 210 returns in the past four years without deductions, you can request a rectification.
• The Spanish tax authorities will then review your claim and issue refunds for any undue payments.

Given the amounts involved (especially for properties with mortgages or high maintenance costs), the potential refunds could be substantial.

Practical steps for non-EU landlords

If you own a rental property in Spain and live outside the EU/EEA, here’s what you should do now:

1. Start including deductions in your next Modelo 210 filing. Gather invoices, receipts, and supporting documentation for all relevant expenses.
2. Review your past tax returns. Check what you paid over the last four years and calculate whether deductions could have reduced your liability.
3. Submit refund claims. If applicable, file rectification requests (solicitud de rectificación de autoliquidaciones) with the Spanish Tax Agency (Agencia Tributaria).
4. Seek professional advice. Spanish tax procedures can be complex, and having expert support will make the process smoother, especially for refund claims.

Why this matters for the expat community

This ruling is not only about money — it’s also about fairness. For years, non-EU landlords were penalized for something as arbitrary as their passport. After Brexit, UK residents were among the hardest hit, suddenly losing access to deductions they had previously enjoyed.

Now, thousands of British, American, Canadian, Swiss, and Australian landlords will see a fairer tax regime applied to their Spanish rental income.

Looking ahead

While this ruling is already a major step forward, it may only be the beginning. If future court decisions extend the 19% rate and other tax reductions to non-EU owners, the financial impact could be even greater.

For now, though, non-EU landlords should act quickly to benefit: start deducting expenses going forward, and claim refunds before the four-year window closes.

Final thoughts

This decision marks a turning point in how Spain taxes non-EU property owners. It not only eases the financial burden for many expats but also brings the system more in line with European legal principles.

If you rent out a property in Spain and live outside the EU, this is the moment to revisit your tax strategy. You may be entitled to significant refunds — and going forward, you can finally calculate your tax bill on a fairer basis.