Spanish Court Grants Non-EU/EEA Landlords the Right to Deduct Rental Expenses (National Court Judgment 636/2021, 28 July 2025)
On 28 July 2025, Spain’s National Court (Audiencia Nacional) issued Judgment No. 636/2021, a landmark decision for international property owners. The Court ruled that non-EU and non-EEA residents renting out property in Spain are entitled to deduct expenses when calculating their taxable rental income under the Non-Resident Income Tax (Impuesto sobre la Renta de no Residentes, IRNR).
Until now, Spanish law (Article 24.6 of the IRNR Law, Royal Legislative Decree 5/2004) allowed such deductions only for residents of the European Union (EU) or the European Economic Area (EEA) with an effective exchange of information agreement. Taxpayers resident in third countries (for example, the United States, the United Kingdom or Switzerland) were excluded, often leading to significantly higher tax liabilities.
Background of the case
The case concerned a U.S. taxpayer who owned a rental property in Barcelona. They filed Form 210 (the quarterly IRNR return for non-residents without a permanent establishment in Spain) and later requested to amend the tax return to deduct expenses such as:
• Depreciation of the property and furnishings
• Community of owners’ fees
• Local property tax (IBI) and municipal rates
• Repairs and maintenance
• Insurance and utilities directly linked to the rental
The Spanish Tax Authorities and the Central Economic-Administrative Court (TEAC) denied the request, arguing that only EU/EEA residents could claim deductions. The taxpayer appealed, and the case reached the National Court.
The Court’s reasoning
The Court found that excluding non-EU/EEA residents from deductions was contrary to international and EU law, relying on three key arguments:
1. Free movement of capital (Article 63 of the Treaty on the Functioning of the European Union, TFEU): this principle applies not only within the EU but also to transactions involving third countries.
2. Non-discrimination under tax treaties: the Spain–U.S. Double Tax Treaty (Article 25) prohibits treating U.S. nationals more harshly than Spanish nationals in comparable circumstances.
3. Interpretation of Spanish law: although Article 24.1 IRNR requires non-residents to be taxed on their gross rental income, it does not explicitly prohibit the deduction of necessary expenses.
On these grounds, the Court annulled the TEAC’s decision and upheld the taxpayer’s right to deduct expenses.
Practical impact
The ruling could significantly reduce the taxable base for non-EU/EEA landlords in Spain, as they may now deduct genuine rental expenses. However, there are important caveats:
• The 24% tax rate remains unchanged: non-EU/EEA residents are still taxed at the flat 24% IRNR rate.
• No rental reliefs: this case does not extend the rental reductions available under Spanish Personal Income Tax (IRPF) to non-residents.
• Not final: the judgment is open to appeal before the Spanish Supreme Court (Tribunal Supremo), so the legal position is not yet fully settled.
What should property owners do?
Even with this uncertainty, the decision is encouraging for non-EU/EEA landlords. The recommended course of action is to:
1. Review past IRNR filings for the last four non-prescribed tax years.
2. File rectification claims (correction requests) to deduct eligible expenses.
3. By doing so, not only can you potentially secure refunds of tax overpaid, but you also interrupt the statute of limitations, ensuring you do not lose the right to reclaim in future years.
Broader context
The European Commission has already launched infringement proceedings (INFR(2018)4085) against Spain over the discriminatory treatment of non-resident landlords. This judgment strengthens the case for reform and suggests that Spain’s restrictive approach will not survive in the long run.
Conclusion and call to action
The National Court Judgment No. 636/2021 represents a major step toward equal treatment of EU/EEA and non-EU/EEA landlords in Spain. While the decision is not yet final, it confirms that non-resident taxpayers should not be disadvantaged simply because they live outside Europe.
At Vicens Assessors, we recommend that non-EU/EEA property owners renting out in Spain act promptly to review and, where appropriate, correct their past IRNR filings. This proactive approach protects your rights, prevents limitation periods from expiring, and positions you to benefit if the Supreme Court upholds this important ruling.
Beyond compliance, our role is to make the process seamless for you: we analyze your specific situation, identify potential refunds, prepare the necessary rectification claims, and represent you before the Spanish Tax Authorities. By acting now, you not only secure your position in light of the new case law but also ensure peace of mind knowing that your Spanish rental income is being handled with full legal and tax efficiency.