Non-Resident Rental Tax in Spain: Supreme Court to Review Expense Deductions for Non-EU Landlords

What has the Spanish Supreme Court actually decided?

By Order of 15 July 2026, Appeal 6741/2025, ECLI:ES:TS:2026:7675A, the Spanish Supreme Court admitted an appeal in cassation concerning the limitation on the deduction of expenses in the Non-Resident Income Tax when rental property located in Spain is owned by a person resident in a third State outside the EU or EEA.

The admission order is important, but it is not a final judgment allowing every non-EU landlord automatically to deduct expenses. The Court has agreed that the issue has objective cassational interest and must now determine how Article 24 TRLIRNR interacts with the free movement of capital under Article 63 TFEU and, crucially, with the standstill clause in Article 64.1 TFEU.

What does Spanish law currently say about non-resident rental expenses?

Under Article 24 of the Spanish Non-Resident Income Tax Law, the general rule for income obtained without a permanent establishment is that the taxable base is calculated by reference to the gross amount. Article 24.6 then provides a specific route for certain EU and EEA residents to deduct expenses, provided those expenses are directly related to the income obtained in Spain and have a direct and inseparable economic link with the activity carried out in Spain.

The Spanish Tax Agency's published guidance continues to reflect that statutory distinction. It states that qualifying EU/EEA residents may deduct relevant expenses, while the general treatment for other non-residents remains taxation on gross rental income.

That is precisely why the litigation matters: the question is whether EU law requires Spain to extend that expense treatment to residents of third countries even though the domestic statute has not yet been amended to say so expressly.

Why did the 2025 National Court judgment matter?

On 28 July 2025, the Spanish National Court issued judgment ECLI:ES:AN:2025:3630 in a case concerning a US-resident taxpayer with Spanish rental income. The Court rejected the administrative position that the taxpayer could not deduct expenses merely because she was resident outside the EU and EEA.

The National Court relied on Article 63 TFEU and the case law extending the free movement of capital to movements between EU Member States and third countries. It considered the exclusion of third-country residents from expense deductions to be contrary to EU law and accepted the rectification of the relevant Modelo 210 self-assessments.

The standstill clause: why Article 64 TFEU could determine the outcome

Article 63 TFEU protects the free movement of capital not only within the EU but also, in broad terms, between Member States and third countries. That is the foundation of the National Court's 2025 reasoning.

However, Article 64.1 TFEU preserves certain restrictions involving third countries where those restrictions already existed on 31 December 1993 and concern, among other matters, direct investment. The Supreme Court's 2026 admission order identifies the application of that standstill clause as a central issue in the pending proceedings.

The legal debate therefore has two stages. First, does taxing a third-country landlord on gross rent while allowing qualifying EU/EEA landlords to deduct directly connected expenses restrict the free movement of capital? Second, if it does, is the restriction nevertheless preserved by Article 64.1 because the relevant type of restriction existed before 1994 and falls within the material scope of the standstill clause?

The Supreme Court may therefore confirm the favourable approach, narrow it, reject it, or consider that further guidance from the Court of Justice of the European Union is needed. Until the merits are decided, a categorical statement that every non-EU landlord is now unquestionably entitled to deduct expenses would overstate the legal position.

Should you wait, deduct the expenses now, or pay and claim a refund?

For a non-EU landlord, there are three conceptually different approaches. They do not carry the same level of procedural or tax risk.

For many taxpayers, the third route is the procedurally cleaner protective strategy: comply first with the position currently reflected in the legislation and Tax Agency guidance, and then challenge the economic result through the rectification and refund procedure. Spanish tax procedure expressly allows a taxpayer to seek rectification where a self-assessment has prejudiced his or her legitimate interests, including where the taxpayer argues that the tax treatment is contrary to EU law.

That does not mean a refund is automatic. The Tax Agency may reject the claim and the case may need to continue through the economic-administrative and, if appropriate, judicial stages. The strength and value of the claim should therefore be assessed against the amount at stake, the evidence for the expenses and the relevant limitation period.

Why waiting for the Supreme Court could cause older refund claims to disappear

The general Spanish limitation period for the right to request tax refunds and refunds of undue payments is four years under Articles 66 and 67 of the General Tax Law. A formal action seeking the refund or rectification can interrupt the relevant limitation period under Article 68.

This means that a landlord should not assume that a future favourable Supreme Court judgment will automatically reopen every historic Modelo 210 return. Older periods can become time-barred while the litigation continues.

Why 2022 returns deserve immediate attention

Whether a particular 2022 filing is still open depends on the precise filing and payment dates, the applicable filing period and whether any prior action has interrupted prescription. There is no sensible one-line answer without reviewing the actual returns. But where 2022 rental income is involved, the limitation analysis is now sufficiently close that it should be checked rather than postponed.

Which Spanish rental expenses could potentially be claimed?

If the third-country deduction argument ultimately succeeds, the relevant expenses are not simply every cost connected in some broad sense with owning property in Spain. The deduction must be tested under the substantive rules and the direct-link requirement applicable to the Spanish rental income.

The quality of the documentary file matters. In a refund claim, the legal principle is only one part of the case; the taxpayer must also prove that each amount satisfies the substantive deduction requirements.

Example: a UK resident landlord with a rental property in Spain

How does the Modelo 210 rectification and refund strategy work?

The procedural route depends on the year, the type of return and the current procedural framework, but the protective logic is straightforward.

The objective is not to pretend the legal uncertainty does not exist. It is to place the taxpayer in the best procedural position while that uncertainty is being resolved.

Modelo 210 rental-income deadlines are also changing

Separate from the deduction litigation, Order HAC/623/2026 changed the filing calendar for Spanish non-resident rental income. For rental or subletting income with tax payable, the new rule moves the filing and payment window to the first 20 calendar days of April of the following year. For direct debit, the corresponding window is generally 1 to 15 April.

For annual grouped rental income, the new timing applies to income accrued in 2026. The Order also applies the revised timing to separately declared rental income where the accrual falls in the final quarter of 2026. These changes therefore need to be built into the filing calendar for 2027.

UK, US, Canadian and other non-EU property owners

UK residents with Spanish rental property

Since the UK is outside the EU and EEA, British-resident landlords fall directly within the third-country issue. For many UK owners, the practical exercise is to identify open Modelo 210 periods, quantify the expenses previously denied and decide whether a protective refund claim is economically justified.

US residents with Spanish rental property

The 2025 National Court case itself concerned a US resident. US owners also need to coordinate the Spanish position with the US reporting and foreign-tax-credit consequences. A Spanish refund can affect the foreign tax ultimately creditable in the United States, so the two sides should not be analysed in isolation.

Canadian and other third-country residents

The core EU-law issue is not limited to the United States. The Supreme Court proceedings concern the broader treatment of residents in third countries. The precise domestic and treaty consequences may nevertheless differ from one country to another.

The wider Spanish tax position

Rental-expense deductions are only one part of non-resident property taxation. Owners may also have Spanish imputed-income filings for vacant periods, capital-gains obligations on sale, the 3% withholding mechanism on a non-resident property disposal and, depending on the facts, wealth-tax considerations.

For an overview of the broader regime, see our guide to non-resident tax in Spain or our Spanish tax services page.