The recent ruling by the National Court No. 3630/2025 represents a significant step forward in equalising the tax treatment of EU and non-EU residents in Spain in relation to IRNR (non-resident income tax). If this case law criterion is consolidated, it would open up a wide field of claims for non-residents in third countries who have been taxed under discriminatory conditions compared to residents in the EU or the EEA.

On 28 July 2025, the National Court delivered Judgment No. 3630/2025 (appeal 636/2021), concerning the taxation of a US-resident taxpayer under IRNR on income derived from the rental of a property in Barcelona.

Both the Tax Authorities and, subsequently, the Central Economic-Administrative Court rejected the taxpayer’s request to rectify her self-assessments, arguing that IRNR regulations only allow the deduction of expenses for residents of the European Union or the European Economic Area with effective exchange of information. As she was resident in the United States, the tax authorities applied the criterion of taxing her gross income without the possibility of offsetting deductible expenses.

The Spanish National Court overturned this position, holding that such a restriction is contrary to European Union law and, in particular, to the principle of the free movement of capital enshrined in Article 63 of the Treaty on the Functioning of the European Union, which also extends to third countries.

The Court recalled that the Spanish Supreme Court has applied this principle in analogous cases, such as inheritance and gift tax. It also referred to the extensive case law of the Court of Justice of the European Union – including the judgments of 3 September 2014 and 12 October 2023 (Case C-670/21) – and of the Supreme Court, which have extended the application of this principle to non-EU residents in similar contexts. 

The Chamber concluded that the current policy of allowing deductions solely for EU and EEA residents, while excluding those residents in third countries, constitutes discriminatory treatment. This contravenes both EU law and the principle of non-discrimination set out in Article 25 of the Double Tax Treaty between Spain and the United States.

This ruling therefore creates a significant opportunity for non-EU non-resident taxpayers who, in recent years, have been prevented from deducting expenses necessary to obtain real estate income in Spain. Such taxpayers may seek to rectify their tax returns (Form 210) and claim a refund of overpaid tax where gross income has been taxed without allowance for deductible expenses.

It should be noted, however, that the National Court’s decision does not yet constitute settled case law, as the State may still appeal before the Supreme Court.

Francisco Campoy

Partner at Emede ETL GLOBAL

fcampoy@etl.es