Tourist rental properties – Spain opens the door to tax deductions for non-resident property owners

A landmark ruling paves the way for fairer tax deductions for non-resident property owners from non-EU countries.

In a historic decision dated 28 July, Spain’s National Court has recognised the right of a non-EU property owner to deduct rental-related expenses in Spain under the Non-Resident Income Tax (IRNR). Until now, this deduction was reserved exclusively for residents of the European Union and the European Economic Area. This ruling could extend the same tax treatment to owners from third countries such as the United States, Morocco, the Middle East, the United Kingdom, Canada, Australia, and Latin American countries.

Although the judgment is not yet final—since it may still be appealed before the Supreme Court—it sets a precedent of enormous importance for Spain’s real estate and tourism markets.

What has the National Court ruled?

The case arose after the Spanish Tax Authority refused to allow a U.S. resident to deduct expenses related to the rental of her property in Spain. The Central Economic-Administrative Court (TEAC) upheld the refusal, but the property owner appealed based on two key legal arguments:

• Case law of the Court of Justice of the European Union (CJEU), which establishes that the free movement of capital (Article 63 TFEU) also protects residents of non-EU countries.
• The Double Taxation Agreement between Spain and the United States (Article 25), which prohibits tax discrimination between nationals of both countries.

The National Court upheld the appeal, stating that Article 24.6 of the IRNR Law must be interpreted in accordance with EU law, thereby extending the right to deduct expenses to non-EU residents. In other words, a more burdensome tax treatment cannot be applied solely because the taxpayer resides outside the EU.

Why is this ruling important for non-EU property owners?

If the Supreme Court confirms this interpretation, it could open up new opportunities for thousands of foreign owners with properties in Spain:

Right to claim IRNR refunds for non-prescribed tax years

Non-EU residents may be able to reclaim tax paid in previous open years for deductible expenses that were not previously allowed.

Equal tax treatment

Expenses such as maintenance, community fees, repairs, insurance, management fees, or interest could be deducted on the same basis as for EU residents.

Greater legal certainty for international investors

The Costa del Sol (Marbella, Estepona, Benahavís, Mijas) would be further strengthened as a transparent, competitive, and secure investment destination.

A ruling at a key moment

The decision comes amid political debate surrounding a proposal—presented on 22 May—to introduce a State Complementary Tax on the Transfer of Real Estate by Non-EU Residents, with a 100% tax rate in certain transactions.

Based on European doctrine and the reasoning of the National Court, such a tax could:

• Contravene EU law by discriminating against non-residents.
• Breach constitutional principles due to its potentially confiscatory nature.

What should non-EU property owners do now?

Although the ruling is not yet final, it is advisable to:

• Review IRNR tax returns from previous non-prescribed years with Spanish tax advisors.
• Gather documentation for deductible rental-related expenses.
• Consult with tax experts to assess potential refund claims.

At Banus Rentals, we support our property owners throughout the entire legal, tax and operational management process, ensuring that each tourist rental property complies with regulations and takes full advantage of all available opportunities.

A potential shift in the tax framework for non-residents

This ruling points toward greater alignment between Spanish legislation and European law. If upheld, it would represent a significant step forward for international investors who operate tourist rentals in Spain, allowing them to deduct expenses and increase profitability.

Spain, and particularly Andalusia and the Costa del Sol, would further consolidate their position as more attractive and competitive destinations for non-EU property owners.