EU Probes Spain’s Tax Treatment of Foreign Property Owners

Initiated by lawyer Alejandro del Campo (DMS Legal) and deemed admissible, the complaint denounces unequal treatment for non-residents, particularly those outside the EU, which has been accentuated by the 2023 Housing Law.

The dispute concerns the non-resident income tax (IRNR). Unlike residents and EU citizens, non-EU owners would not be able to deduct certain expenses (condominium, property tax IBI, loan interest, depreciation) and would be subject to a rate of 24% on their rental income, compared to 19% for Union nationals.

A previous complaint in 2018 had been rejected by the Commission, which had invoked restrictions prior to 1994 (TFEU Art. 64). The lawyer brought the case before the Spanish National Court, claiming the deductibility of expenses, the 19% rate, and access to tax reductions for renting as a main residence (the former 60%, and the new rates of 50% to 90%). A decision is expected in late 2025 or early 2026.

The new complaint of March 2024 emphasizes the impact of the 2023 Housing Law. This introduces for residents tax reductions that can reach 90%, widening the potential gap with non-residents. At the same time, a separate infringement procedure opened by the Commission in 2019 against Spain, concerning the former 60% deduction for EU residents, is still ongoing.

Faced with these developments, it is recommended that foreign owners take action. "They must request a refund, because if they let the time limit expire, it will be almost impossible for them to recover their money. This is done administratively, by filing a tax return correction, requesting the deduction of expenses, the application of the 19% rate, and also the 60% reduction for renting as a main residence that was in effect before 2023," advises the lawyer. He stresses the urgency related to the limitation periods, particularly for 2021 income (declared quarterly) whose deadline is approaching this April [2025], and notes the increase in affected British owners post-Brexit. The new deductions (50-90%) apply to 2024 income.