A landmark ruling by Spain’s National High Court has declared a key part of its non-resident tax law illegal. This decision allows property owners from outside the EU/EEA—including those from the UK, USA, and Switzerland—to reclaim a significant portion of the income tax paid on rental properties over the last four years.
In this guide, we translate this complex legal victory into a clear, actionable strategy for you to recover your money.
If you are a non-EU resident owning a rental property in Spain, you were forced to pay a 24% tax on your gross rental income, without deducting any expenses. This injustice has now ended.
The Problem: An Unfair Two-Tier Tax System
For years, Spain’s Non-Resident Income Tax (IRNR) law created a stark divide:
- EU/EEA Residents: Were taxed at 19% on their net rental income, allowing them to deduct all legitimate expenses (mortgage interest, maintenance, fees, etc.).
- Non-EU/EEA Residents: Faced a much higher tax burden, being taxed at 24% on their gross rental income, with no right to deduct a single expense.
The Legal Breakthrough: Free Movement of Capital
The turning point was a historic court decision that found the Spanish law violated the EU principle of free movement of capital. The court affirmed that this freedom extends to capital movements between the EU and third countries. By preventing non-EU investors from deducting legitimate expenses, Spain was imposing an illegal restriction.
The consequence is clear: All non-resident property owners, regardless of their country, now have the legally recognized right to calculate their tax based on net rental income.
Your Opportunity: How to Claim Your Tax Refund
The right to claim is limited by a four-year statute of limitations. This means you can only reclaim overpaid taxes from declarations filed within the last four years. Time is critical; every quarter that passes, you risk losing the right to claim for that period.
What Expenses Can You Now Deduct?
The shift from gross to net income calculation is a game-changer. You can now deduct a wide range of documented expenses:
- Financial Costs: Interest paid on your mortgage loan.
- Property Taxes & Fees: The annual property tax (IBI) and municipal fees.
- Community Fees & Administration: Payments to your community of owners and property management fees.
- Maintenance & Repairs: Costs to keep the property in good condition (e.g., painting, plumbing).
- Utilities: Electricity, water, and gas bills, if paid by you as the landlord.
- Insurance Premiums: Costs for home, liability, or rental protection insurance.
- Property & Furnishings Depreciation: A significant deduction, often 3% of the construction value of your property each year, plus depreciation of furniture.
The Claim Process: A Step-by-Step Overview
The formal procedure involves submitting a request for rectification for each previously filed tax return (Form 210).
- Viability Analysis: First, we calculate the potential refund amount by retroactively applying all eligible deductions to your past tax declarations.
- Document Compilation: We help you gather all official invoices and receipts for the expenses you intend to claim. Meticulous documentation is key.
- Formal Submission: We prepare and file the rectification requests with the Spanish Tax Agency (AEAT), including a robust legal argument based on the new court ruling.
- Follow-Up: We manage the process, respond to any information requests, and ensure the refund is processed correctly.
Lextax: Your Expert Partner in Spain
While this ruling is a major victory, navigating the Spanish tax system to secure your refund is complex. Administrative errors or a weak legal argument can lead to rejection of your claim.
At Lextax, our dedicated team of international tax law experts specializes in representing non-resident clients. We manage the entire claims process on your behalf, providing clarity and security at every step.
- A comprehensive review to maximize your potential refund.
- Meticulous preparation of all legal and administrative paperwork.
- Direct representation before the Spanish Tax Agency.
- Proactive management of your case from start to finish.
Don’t let this opportunity pass. Contact Lextax today for a consultation and let our experts help you reclaim the money that is rightfully yours.