A landmark ruling from Spain’s Audiencia Nacional on 28 July 2025 has brought very welcome news for non-EU property owners who rent out their homes in Spain.
For years, there has been a clear disparity in how rental income was taxed depending on whether you were resident in the EU/EEA or outside it.
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EU/EEA residents could deduct all relevant expenses – such as repairs, community fees, insurance, mortgage interest – and then pay 19% tax on the net rental income.
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Non-EU residents (including British owners since Brexit, as well as Swiss, US, Canadian and many others) had no such right. They were forced to pay 24% on gross income, with no deductions allowed at all.
This system has now been declared unlawful by the Court. The judges confirmed that it violates EU law (Article 63 of the Treaty on the Functioning of the European Union) because it restricts the free movement of capital not only between EU states but also between the EU and third countries.
What does this mean in practice?
Non-EU owners who rent out property in Spain can now deduct their expenses when filing their Spanish Non-Resident Income Tax return (Modelo 210). Even more importantly, they may be entitled to claim back overpaid tax from the last four years by requesting a rectification of their returns.
The court did not yet address the issue of the different tax rates (24% vs 19%), but cases are ongoing and many lawyers expect further progress on this front too. For now, the key victory is that the door to deductions has been opened.
Why is this important?
For many non-EU landlords, the inability to deduct costs meant paying tax on money they never truly earned. For example, if you rented out your property for €10,000 a year but had €3,000 in expenses, EU landlords paid tax on €7,000, while non-EU landlords paid tax on €10,000. This could easily make the difference between profit and loss.
The ruling is therefore not only a matter of fairness, but also of financial relief for thousands of non-EU property owners.
Next steps
If you are a non-EU property owner renting in Spain, now is the time to review your situation.
This is a major step towards tax equality in Spain for non-EU landlords.
Have you been affected by this rule? Do you think you will be making a claim? Share your thoughts in the comments below.
