The National Court has issued an important ruling that provisionally recognises the right of non-EU residents (people who live outside the EU) to deduct expenses associated with the rental of properties in Spain from their Non-Resident Income Tax (IRNR).
Until now, this possibility was only available to EU residents, which meant that there was a difference in tax treatment between EU residents and non-EU residents. However, it is important to proceed with caution, as the ruling is not final and is probably challenged by the Spanish Tax Office before the Supreme Court, whose future decision will be decisive.
The National Court bases its ruling on the following:
- Article 63 of the Treaty on the Functioning of the EU (TFEU): Guarantees the free movement of capital, also applicable to residents of third countries.
- Case law of the Court of Justice of the EU (CJEU): Judgments of 3 September 2014 and 12 October 2023, extending the principles of tax equality to non-EU nationals in comparable situations.
In addition, the judgment annuls:
- The decision of the Central Economic-Administrative Court (CEAC).
- The decision of the Spanish Tax Office that had rejected the deduction of expenses requested by a non-EU taxpayer.
Scope of the ruling.
If the ruling is upheld by the Supreme Court, non-EU residents could deduct expenses related to the rental of properties in Spain, just like EU residents. These potential expenses would include:
- Mortgage interest.
- Community fees.
- Repairs and maintenance.
- Real estate agency fees.
- Local taxes such as IBI (property tax).
Future perspective.
Everything indicates that the Spanish Tax Office will file an appeal before the Supreme Court.
Although case law seems to favour tax equality (Previous rulings issued by the Supreme Court had already applied this principle of tax equality to inheritance and gift tax, extending the principle of non-discrimination to non-EU residents), there is no guarantee that the Supreme Court will uphold the National Court’s interpretation. Until there is a final ruling, any tax strategy based on this judgment should be planned with caution.
Conclusion.
The ruling of the National Court of 28 July 2025 represents an important step in the direction of tax equality between EU and non-EU residents in Spain, as it opens the door to the deduction of expenses in the IRNR for property rentals. However, it should be noted that the ruling is not final and could be revoked by the Supreme Court.
From a strategic point of view, it is best to request the rectification of the affected tax declarations, even if the Spanish Tax Office may reject them at this time, as this would interrupt the prescription period and keep alive the taxpayer’s right to benefit from the corresponding refunds if the Supreme Court finally confirms the doctrine established by the National Court.
