As we know, non-EU residents who obtain income from real estate capital by renting properties in Spain cannot deduct the expenses associated with the rental, given that the Non-Resident Income Tax regulations only grant this possibility to taxpayers resident in the European Union (EU) or the European Economic Area (EEA) with exchange of information, as confirmed by administrative criteria.
The Court considers it contrary to EU law and the principle of free movement of capital to limit the possibility of deducting expenses necessary for obtaining rental income from the property only to EU or EEA residents, without accepting that it also extends to the tax returns of non-residents in third countries.
This new criterion opens the way for requests to rectify self-assessments in Spain that have not yet expired and for the return of undue income from non-EU citizens who were denied the deduction, without prejudice to the State’s right to appeal this ruling.
Obviously, if the Tax Agency is successful in making the corrections, this will have repercussions in the countries where the deduction for international double taxation has been applied. Therefore, it is advisable to coordinate the action both in Spain and in the country of residence.