Recent legal developments in 2025 have opened a promising door for non-EU property owners in Spain, particularly regarding the taxation of rental income. While these landmark rulings suggest a shift toward fairer treatment, the current environment demands a strategy of caution over haste.
The Legal Context: A Significant Shift
The Spanish National Court and the European Commission have recently challenged the discriminatory tax treatment of non-EU/EEA residents. Key highlights include:
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Expense Deductions: Rulings from July 2025 indicate that non-EU residents should be entitled to deduct property-related expenses (repairs, taxes, fees) from their taxable income, a right previously reserved for EU residents.
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Gross vs. Net Income: Historically, non-EU owners were taxed on gross income, whereas these new rulings advocate for taxation on net profit.
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Treaty Compliance: The current restrictions on deductions have been deemed a violation of Article 63 of the Treaty on the Functioning of the European Union (TFEU), regarding the free movement of capital.
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Notional Rent Tax: The European Commission has formally challenged the «notional rent» tax applied to non-rented properties owned by non-residents.
Why Precipitation Can Be Counterproductive
Despite these «wins,» initiating immediate legal claims may not be the most beneficial path for every taxpayer at this moment. A prudent approach is advised for several technical reasons:
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The Risk of «Double Taxation» Discrepancies: If a taxpayer successfully claims a refund in Spain, their total tax paid in Spain decreases. To remain compliant, the taxpayer must be consistent and report this change in their country of residence.
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Cash-Flow Disadvantage: Rectifying a tax return in the UK (HMRC) to account for a lower Spanish tax credit could trigger an immediate payment obligation. If the Spanish refund is still caught in administrative processing, the owner may find themselves paying more in the UK before actually receiving the money back from Spain.
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Pending Legal Finality: These rulings are subject to potential appeals by Spanish tax authorities to the Supreme Court. Until these criteria are officially and permanently adopted by the Spanish Tax Agency (Agencia Tributaria), premature claims could lead to administrative rejections or prolonged legal disputes.
A Measured Strategy
Fortunately, the Spanish tax system allows for a four-year window to file for the rectification of tax returns (Modelo 210). This statute of limitations provides ample time for owners to wait for the legal dust to settle without losing their right to claim.
Our Advice: We strongly recommend a «wait and see» approach. Collecting the necessary documentation and monitoring the developments is wise, but rushing into filings before the administrative path is clear can result in unnecessary costs and complications in both jurisdictions.
Does your property fall under these new rulings? If you would like a professional assessment of your situation to prepare for future actions—without the risks of over-precipitated claims—please contact our office for a consultation.