Since Brexit, UK residents noticed as non-EU residents that their non-resident tax in Spain increased for a higher proportion. This isn’t exclusively because of Brexit as other non-EU residents had the same problem, but it highlighted an endless problem: The non-resident tax isn’t fair. However, the Spanish Courts are agreeing with the non-residents and making fairer this tax. Let’s see it in detail.
Non-resident taxation
When you have rental income in Spain, depending on where you are resident, the taxation varies:
- For EU citizens: You can deduct expenses of your property from the gross income and the profit is taxable for a tax rate of 19%
- For non-EU citizens: You’re not allowed to deducted expenses, so the tax base is your gross income and the tax rate is 24%.
This taxation method is unfair as you can end up paying taxes even after making a loss and for a higher tax rate.
Changes
On 28th July of 2025, the Spanish National Court (Audiencia Nacional) ruled recognizing the right to deduct expenses on the rental tax for non-EU citizens.
The reasons are Spain is not respecting the free movement of capital right in the EU and the non-discrimination clauses included in the double tax treaties. Pretty much al tax treaties between countries establish their citizens can’t be treaty unfairly compared to others.
This outcome leaves the door open to deduct expenses for the last 4 years.
Challenges
Tax Agency isn’t happy with this Sentence and still has the opportunity to appeal it in the Supreme Court. This means that you can request the last 4 years in the meantime but what happens with the future tax returns? The correct way is to submit the next tax returns as it used to be and then request a refund. This isn’t efficient at all but it’s the only way to guarantee that right.
Also, it’s important to highlight Tax Agency will review thoroughly any request to avoid giving refunds, even delaying the process as much as possible. It won’t be an easy task.
Conclusion
Although these are good news, unfortunately, Spain is leaving us in a long uncertainty state. Yes, Spanish Courts have ruled positively, but the law remains the same, increasing litigation. Not until Supreme Court rules forcing Tax Agency to remove this, will we have a fair non-resident tax.
