Linda Moreau lives in San Diego, California, and has a flat in Marbella let to a family for 1,200 € a month. Every year she pays in Spain the IBI (the annual municipal property tax), the community fees, the insurance and the interest on the loan she bought it with. Her neighbour across the landing, a retired man from Lyon with an identical flat and the same rent, told her that he deducts all those costs in his return. Linda cannot. Her question is simple: why, and whether there is anything to be done.
The short answer is that the law says no, a court has said yes, and the Tribunal Supremo, Spain's Supreme Court, has not yet ruled. If you live outside the European Union and let a property in Spain, right now you have two paths and both have consequences.
The article 24 rule and its European exception
Article 24.1 of the Non-Resident Income Tax Law (IRNR), the consolidated text approved by Real Decreto Legislativo 5/2004, sets the general rule: a non-resident is taxed on the gross amount, with no deduction of any cost. Section 6 opens an exception: anyone resident in another European Union state may subtract the costs provided for in the IRPF Law (Spanish personal income tax), provided they can prove that the costs are directly related to the income obtained in Spain. The exception extends to the states of the European Economic Area with an effective exchange of information: Iceland, Norway and Liechtenstein.
Article 25 adds a second difference: the rate is 19 % for residents of those states and 24 % for everyone else.
Linda's figures and her neighbour's
Both flats bring in 14,400 € a year. The costs are the same:
| Item | Neighbour in Lyon | Linda, in San Diego |
|---|---|---|
| Rent collected in the year | 14,400 € | 14,400 € |
| IBI | −700 € | not deducted |
| Community fees | −1,800 € | not deducted |
| Insurance | −350 € | not deducted |
| Loan interest | −2,400 € | not deducted |
| Depreciation of the building | −3,150 € | not deducted |
| Taxable base | 6,000 € | 14,400 € |
| Applicable rate | 19 % | 24 % |
| Tax due | 1,140 € | 3,456 € |
Linda pays three times as much for the same flat, the same tenant and the same rent. If she could deduct the costs while keeping her 24 % rate, she would pay 1,440 €: 2,016 € less every year. What is being argued before the courts is the costs, not the rate, and that is the figure that matters to Linda.
The judgment that opened the door
The Audiencia Nacional, Spain's national high court, in a judgment of 28 July 2025 (ECLI:ES:AN:2025:3630), found in favour of a taxpayer resident in the United States. Its reasoning: that exclusion restricts the free movement of capital under article 63 of the Treaty on the Functioning of the European Union, which, unlike the other freedoms, protects not only movements between member states but also those with third countries. If the French resident deducts and the American resident does not, for the same property and the same income, there is a difference in treatment that needs justifying.
The Supreme Court, by order of 15 July 2026 (ECLI:ES:TS:2026:7675A), has admitted the appeal in cassation against that judgment. And it has indicated what the case will turn on: the standstill clause in article 64.1 of the Treaty.
Why standstill decides everything
Article 64.1 allows restrictions on movements of capital with third countries to be kept if they already existed on 31 December 1993, provided they concern certain transactions, among them direct investment, including investment in real estate.
That is where the argument lies, and it is finer than it looks:
- The IRNR Law dates from 1998 and its consolidated text from 2004, so it did not exist in 1993. But at that date the taxation of non-residents was regulated, alongside that of residents, in Law 18/1991 on IRPF, whose article 18 already prevented non-resident individuals from deducting costs. The Supreme Court's order suggests that the absence of a separate law in 1993 does not seem to be an obstacle to the analysis: what is compared is the restriction, not the name of the rule that contains it.
- It remains to be decided whether buying a flat to let it out is direct investment for these purposes. That is a concept of European Union law, not Spanish law, and it is precisely where the Supreme Court might end up referring a question to the Court of Justice of the European Union before deciding.
That there is still no settled case law. There is one favourable judgment of the Audiencia Nacional, an appeal admitted against it and a ruling still pending. Anyone who tells you today that the refund is guaranteed is not telling you the whole story.
The two paths, and their consequences
The cautious path: file without deducting, then ask for rectification
You file Modelo 210, the non-resident return, as the law says, on gross income, and straight away you file a request to rectify the self-assessment with a refund of tax unduly paid, relying on article 63 of the Treaty.
- There is no risk of penalties: you have declared what the tax authorities consider correct.
- The request interrupts the limitation period for that year, so the year stays open while the Supreme Court decides.
- If the tax authorities reject it, as is to be expected while there is no case law, you appeal and wait.
This is the path we suggest in most cases, because it preserves the right without exposing you.
The position-taking path: deduct directly in the 210
You file deducting the costs, leaving a record of the criterion applied.
- It is consistent with the Audiencia Nacional judgment.
- But the tax authorities will adjust the return, with late-payment interest, and may try to impose a penalty. Against the penalty you can argue a reasonable interpretation of the rule, and a favourable Audiencia Nacional judgment is a solid argument, although not a guarantee.
- It makes sense when the amount justifies the fight and you are prepared to see it through.
| Cautious path | Position-taking path | |
|---|---|---|
| What Linda pays when filing | 3,456 € | 1,440 € |
| Risk of a penalty | No | Yes, arguable |
| Interest if the Supreme Court rules against | No | Yes, on 2,016 € |
| If the Supreme Court rules in favour | Refund of 2,016 € plus interest | Nothing to refund |
| Cost of keeping the case going | Rectification and appeals | Defence against the adjustment |
If you would like us to review your 210 returns for recent years and prepare the rectification requests that are still in time, you can send us the returns and the invoices through the non-residents form.
We do not promise the refund. We tell you what each path costs, which one keeps the deadline open and what happens in each scenario, and you make the decision in writing.
The four-year clock
Article 66.c) of the Ley General Tributaria, the General Tax Law, gives four years to request a refund of tax unduly paid, counted from the end of the filing period for each return. Each 210 has its own clock. If Linda lets time go by, each year that expires is about 2,016 € that she will no longer be able to claim, whatever happens at the Supreme Court. With four years still open, what is at stake is around 8,000 €.
Rentals for 2026 are declared from 1 to 20 April 2027, or until the 15th if you pay by direct debit, under Order HAC/623/2026. That 210 is the first one in which Linda can apply the path she chooses from the start.
What is certain, whatever happens
Regardless of how this ends, there are three things that do not depend on the Supreme Court:
- Keep the invoices for costs for every year not yet time-barred. If the criterion is confirmed, the refund only goes as far as the evidence goes. Without invoices there is nothing to rectify.
- Keep a count of the days, because costs are apportioned according to the time the property was let.
- Hold a current tax residence certificate, which is what shows where you live and which tax treaty applies.
The non-residents page explains the other obligations of anyone who owns a property in Spain and lives abroad, from imputed income on an empty flat to the sale.