Today we discuss an important ruling from the National High Court that affects non-resident property owners with rental properties in Spain.
Until now, the law allowed only residents of the European Union or the European Economic Area to deduct expenses related to rental income, while residents of third countries were not allowed to do so.
However, in its ruling of July 28, 2025, the National High Court has accepted that residents of third countries may benefit from this expense deduction.
The court upheld the claim of a taxpayer resident in the United States, who owns a rental property in Spain and sought the right to deduct expenses related to that rental. The TEAC had rejected the deduction, arguing that the regulation only allows such deductions for residents of the EU or EEA and that there is no European case law specifically addressing the deductibility of expenses for rental properties owned by non-EU residents.
The National High Court understands that denying this deduction violates both the free movement of capital principle under Article 63 of the Treaty on the Functioning of the European Union —which the CJEU has held to be applicable to third countries— and the non-discrimination principle set out in Articles 1 and 25 of the Spain-U.S. Double Taxation Treaty. It also notes that the evolution of Article 24.6 of the Spanish Non-Resident Income Tax Law (TRLIRNR) shows a legislative effort to align the regulation with EU law, progressively expanding the subjective and material scope of deductions, but without extending them to residents of third countries —a limitation incompatible with the requirements of the TFEU and the case law of the CJEU.
Although the ruling does not establish binding case law, it represents a major milestone in achieving equal tax treatment for non-EU non-residents compared to residents in Spain, the EU, or the EEA.
It is still too early to open the door to filing amendments for non-statute-barred years and claiming refunds for overpaid tax, but this is a significant step forward in a debate that clearly highlights discrimination against non-EU residents.