In its judgment of July 28, 2025 (ECLI:ES:AN:2025:3630), Spain’s National Court (Audiencia Nacional) ruled that all non-resident taxpayers are entitled to deduct expenses when calculating income derived from rental properties located in Spain for Non-Resident Income Tax (IRNR) purposes.

Until now, this right was generally limited to residents of the European Union (EU), the European Economic Area (EEA), or taxpayers with a permanent establishment in Spain.

According to the Court, denying this deduction to other non-resident taxpayers constitutes a restriction on the free movement of capital.

Legal Background

Article 24.1 of the Non-Resident Income Tax Law (approved by Royal Legislative Decree 5/2004 of March 5) requires non-residents without a permanent establishment in Spain to be taxed on their gross income.

However, the current rules only allow residents of other EU or EEA countries to deduct directly related expenses that would otherwise be deductible by Spanish tax residents.

What Does This Mean in Practice?

The ruling opens the door to significant opportunities for non-resident taxpayers:

• The possibility of requesting amendments to previously filed tax returns (Form 210).
• The possibility of claiming refunds for undue tax payments made during the last four non-prescribed years.

Important Considerations

The Spanish Tax Administration may still challenge this interpretation, and the Spanish Supreme Court will ultimately have the final say on the matter.

Conclusion

This judgment represents a historic step toward greater tax equality for non-resident taxpayers with rental properties in Spain.

However, the matter has not yet been definitively settled. Any future appeals and the eventual decision of the Supreme Court will be crucial in determining the final scope of this important legal precedent.

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