Non-EU residents and deduction of expenses in the Non-Resident Income Tax (NRIT): has tax discrimination been overcome?

For years, Spanish law has been clear: those who resided outside the European Union (EU) or the European Economic Area (EEA) and obtained income from renting property in Spain could not deduct any expenses. The Spanish Tax Authorities applied this interpretation strictly and the Central Economic-Administrative Court (TEAC) had repeatedly upheld it.

However, the National Court, in its ruling of 28 July 2025 (SAN 3630/2025, rec. no. 636/2021), categorically rejects this interpretation. In a case involving a resident of the United States, the Court recognised that excluding non-EU taxpayers from deducting expenses is contrary to the principle of free movement of capital in Article 63 of the Treaty on the Functioning of the European Union, which also applies to third countries and takes precedence over domestic law.

Therefore, non-EU taxpayers are recognised for having the right to deduct expenses related to the rental of properties located in Spain, provided that these:

-        are directly related to the income obtained, and

-        have a clear and inseparable economic link with the income-generating activity.

The Court also invokes the non-discrimination clause of the Spain-US Agreement and refers to the established doctrine of both the Supreme Court and the General Directorate of Taxation, which had accepted comparable treatment in similar cases (even regarding third countries such as Andorra and Russia).

What does this mean for the future?

Although this ruling can still be appealed before the Supreme Court, its practical effects are significant:

• Possibility of requesting a refund of undue payments for years still open to claim.
• Express recognition of the right of non-EU residents to deduct expenses in the NRIT.

Are you a non-EU resident with property in Spain?

👉 At Forvis Mazars, we have a team of experts in non-resident taxation who can review your case and advise you on how to appeal and optimise your taxation.