Non-residents of the European Union are now able to reclaim tax relief on their Spanish property rental income thanks to a new ruling by the Spanish National Court, according to global law firm Baker Mackenzie.
The Spanish National Court issued a “landmark resolution” with significant implications for the real estate sector and international taxation in Spain at the end of July, one that Baker Mackenzie believes, for the first time, it recognizes the right of non-EU/EEA nonresidents to deduct necessary expenses associated with the rental of properties located in Spain. As a result this will align with their tax treatment with that of residents and EU/EEA non-residents.
In a report, published on its website on Tuesday, Baker Mackenzie said that it believes that the decision by the Aspnish Natina court now eliminates the previous discrimination suffered by non-EU/EEA nonresidents, who were taxed on the gross rental income without the possibility to deduct expenses such as interest, repairs, insurance, property tax (Impuesto sobre Bienes Inmuebles (IBI)) or community fees.
The resolution opens the door to the rectification of past tax returns and the recovery of unduly paid amounts, representing a strategic opportunity for international property owners,” the report noted.
In conclusion, Baker Mackenzie said that the recent doctrine established by the National Court marks a “milestone in the tax equalization of non-EU/EEA nonresidents in Spain”.
“It allows them to deduct expenses associated with the rental of their properties, correcting long-standing discrimination. This measure enhances legal certainty and strengthens the competitiveness of the Spanish real estate market, opening new opportunities for international investment and optimizing the tax planning of foreign property owners,” the report read.
For additional information on the matter the Baker Mackenzie report is printed in full here.
