The ruling handed down on 28 July 2025 by the High National Court, appeal no. 636/2021, has just been published. It considers that it is contrary to EU law and Article 63 of the Treaty on the Functioning of the EU (free movement of capital) to limit the possibility of deducting the expenses necessary to obtain income from the rental of property to EU or EEA residents, without accepting that it also applies to the tax returns of non-residents from foreign countries.

The ruling is not “mine”; as it does not derive from a case in which I have been involved, so first of all I would like to wholeheartedly congratulate my colleague who achieved it.

The ruling does not resolve on the discrimination involved in non-EU citizens having to apply a tax rate of 24% compared to the 19% rate that EU and European Economic Area residents can apply.

In any case, it is public knowledge that I have been fighting for many years against this unfair discrimination suffered by non-EU citizens who rent their properties in Spain, due to the Non-Resident Income Tax (NRIT), and I have an important case before the High National Court too, which in a few months will also have to rule on the possibility of applying the 19% rate and also on the possibility of applying the 60% reduction (currently 50%) for the rental of homes to all non-residents, as provided for in the Personal Income Tax (for residents in Spain) and not in the Non-Resident Income Tax.

In fact, as we were awaiting these favorable rulings from the High National Court against discrimination against non-EU citizens, on 24 March 2025 we published a post on our blog “NON-RESIDENTS WITH RENTED PROPERTIES IN SPAIN: IT’S TIME TO CLAIM A REFUND”, encouraging all those affected to claim a refund before their right expires, providing them with a simple template to do so free of charge.

Many people requested the form and are requesting the rectification of their Non-Resident Income Tax self-assessments and the refund of undue payments, and there is no doubt that the recent ruling of the High National Court, dated July 28, 2025, has facilitated the way for them to achieve this.

It is possible that the State Attorney’s Office will decide to lodge an appeal against this ruling, but we are confident that the Supreme Court will ultimately reject the discrimination against non-EU citizens, which is so clearly contrary to EU law.

On the other hand, it is even clearer that it makes no sense to create a ‘State Supplementary Tax on the Transfer of Real Estate to Non-EU Residents’ with a tax rate of 100%! This was included in the bill presented on May 22, 2025, by the Socialist Parliamentary Group.

OUR FIGHT AGAINST THIS DISCRIMINATION

For years, I have been reporting the absurd and unfair discrimination suffered by non-residents, whether Spanish or foreign, who own rented properties in Spain when they are taxed under the Non-Resident Income Tax.

All non-residents who rent properties in Spain are discriminated because they are not allowed to apply significant reductions in their NRIT returns that residents in Spain can apply in their personal income tax returns (from 60% until 2023 and from 50% to 90% since 2024).

Non-EU non-residents are brutally discriminated against compared to residents of the EU or the European Economic Area because the latter can deduct all types of expenses directly related to the property and pay NRIT on the net income at a rate of 19%, while non-EU residents must pay tax on gross income, without being able to deduct any expenses, at a rate of 24%.

In 2018, we reported the discrimination against non-EU nationals to the European Commission, who acknowledged that it could constitute a restriction on the free movement of capital under Article 63 of the Treaty on the Functioning of the EU (which prohibits all restrictions on capital movements not only between Member States but also between Member States and foreign countries). However, the EC did not want to initiate an infringement proceeding against Spain, considering, in a highly questionable manner, that based on Article 64 of the Treaty on the Functioning of the EU, Spain could keep this discrimination against non-EU citizens because it already existed before 1994. I explained everything in my post on 4 June 2021 entitled “Saving the non-EU citizen who rents property in Spain. The European Commission is not making it easy”.

I then took the battle to the Spanish courts, which, due to the primacy and direct effect of EU law, can either disapply a regulation that violates it or refer the matter to the European Court of Justice for a preliminary ruling. In fact, we currently have a case at an advanced stage before the High National Court, already pending a vote and ruling, in which we have requested for a non-EU citizen (resident in Andorra) who rents out properties in Spain the rectification of his self-assessments for NRIT and the refund of undue payments. We are requesting the deduction of all expenses related to the properties and the application of the 19% rate, as is allowed for EU owners.

We also request the 60% reduction on net rental income that was allowed for residents subject to Personal Income Tax, with the arguments I explained in my post of March 23, 2021, entitled ‘Spain continues to discriminate against non-residents with rented properties, ignoring EU case law’.

In March 2019, the European Commission initiated an infringement proceeding against Spain, number INFR(2018)4085, for not allowing non-resident EU owners to benefit from the 60% reduction on net income from renting PROPERTIES that resident individuals applied for PIT purposes, which was in force until December 31, 2023.

According to the European Commission’s website, this procedure is still ongoing, with no evidence that it has moved on to the next stage with the issuance of a reasoned opinion:

That is why on March 19, 2025, we filed a complaint before the European Commission reporting that the Spanish legislature, far from eliminating the discrimination questioned by the EC in March 2019, has increased it considerably, since Article 23.2 of the Personal Income Tax Law, in the wording in force since January 1st, 2024 (introduced by Law 12/2023 of 24 May) has established that the reductions applicable to individuals resident in Personal Income Tax can reach up to 90% in certain cases of residential leases. On March 24, 2025, we received acknowledgement of receipt of this complaint, which the EC has registered under number CPLT(2025)00421.

The recent ruling of the High National Court of July 28, 2025, and the one we expect shortly on the possibility of applying the 19% rate to non-EU citizens and the 60%-50% reduction for residential leases in the Non-Resident Income Tax, will be the beginning of the end of discrimination.

Palma de Mallorca, August 18, 2025.

Alejandro del Campo Zafra

Solicitor and tax advisor