If you own property in Spain and live outside the European Union, you’ve probably felt the frustration of paying more taxes than your EU neighbors. Until mid-2025, non-EU residents had to declare rental income under the IRNR (Non-Resident Income Tax) based on gross rental income, without the possibility of deducting any expenses.
Meanwhile, EU and EEA residents could deduct expenses such as property tax (IBI), community fees, insurance, or repairs, and pay tax on net rental income at a lower rate (19%).
On July 28, 2025, Spain’s National High Court, in ruling 636/2021, radically changed this situation: non-EU residents now also have the right to deduct rental expenses under the IRNR in Spain, correcting an inequality that had unfairly penalized thousands of property owners for years.
IRNR AND NON-EU RESIDENTS: THE PREVIOUS INEQUALITY
The IRNR (Non-Resident Income Tax) applies to income earned in Spain by individuals who are not tax residents, such as rental income from real estate.
Before the 2025 ruling, the difference was clear:
- Non-EU residents: taxed at 24% on gross rental income, with no deductions.
- EU/EEA residents: taxed at 19% on net rental income, with full access to expense deductions.
Deductible expenses for EU/EEA residents included:
- Property tax (IBI) and local rates.
- Community fees and maintenance costs.
- Insurance premiums.
- Necessary repairs.
- Depreciation of the property.
This discriminatory treatment created a significant financial burden and violated Article 63 TFEU, which protects the free movement of capital, as well as case law from the Court of Justice of the European Union (CJEU).
NATIONAL HIGH COURT IRNR RULING 2025: A HISTORIC CHANGE
In ruling 636/2021, the National High Court declared that Spain’s legislation breached European principles of tax equality and free movement of capital.
From now on, non-EU property owners in Spain can:
- Apply the same rental expense deductions as EU residents.
- Reduce their taxable base under the IRNR.
- Ensure fair treatment compared to other non-resident taxpayers.
This recognition of rights represents a turning point in the tax optimization of non-residents in Spain.
LEGAL GROUNDS FOR THE RULING
The decision rests on three main pillars:
- Article 63 TFEU – prohibits restrictions on the free movement of capital, both between Member States and with third countries.
- Double Taxation Treaties – bilateral agreements (e.g., with the U.S., Mexico, Argentina, Canada, etc.) that seek to prevent double taxation and reinforce the principle of non-discrimination.
- CJEU Case Law – which recognizes that residents of third countries must have access to comparable tax benefits when in similar situations.
As a result, Spain must treat all taxpayers equally, regardless of nationality.
HOW NON-EU RESIDENTS CAN CLAIM IRNR REFUNDS
The most important aspect of this ruling is not only its impact going forward but also its retroactive effect. Non-EU residents can:
- Amend previous tax returns (Form 210 IRNR) for the past 4 non-expired years.
- Claim refunds of overpaid taxes due to previously disallowed deductions.
- Reduce future tax liabilities by applying the correct deductions.
Practical Example of Savings:
A non-EU property owner rents out an apartment in Madrid for €12,000 per year, with deductible expenses of €4,000.
- Before the ruling: tax = 24% of €12,000 → €2,880.
- After the ruling: tax = 24% of €8,000 → €1,920.
👉 Annual savings: €960. Over 4 years, that’s more than €3,800 reclaimable through tax refunds.
CONCLUSION
The National High Court ruling of July 2025 is nothing short of a revolution in Spanish tax law: at last, non-EU residents can deduct rental expenses under the IRNR, aligning their position with EU residents.
This means:
- Significant tax savings.
- The possibility of reclaiming excess taxes already paid.
- Greater legal certainty for investing in Spain.
At CPG, we have years of experience advising non-resident property owners. Now more than ever, we can help you file refund claims, amend past tax returns, and optimize your future taxation in Spain.
