Spanish Rental Property Taxes in 2025: Guide for Non-EU Buyers

As any sophisticated investor knows, property acquisition is only one part of the equation. The tax regime governing ownership, rental income, and eventual divestment plays a decisive role in determining net performance. For many years, non-EU owners faced a materially higher tax burden than their European counterparts – an imbalance that is shifting.

Spain’s Evolving Property Tax Landscape

Spain has long stood as one of Europe’s most compelling real estate destinations, attracting discerning buyers from the United States, the United Kingdom, the Middle East, and beyond. Nowhere is this more evident than in Marbella and its surrounding gated enclaves, where prime properties combine lifestyle value with tangible investment returns.

For years, non-EU property owners renting out homes in Spain faced higher taxes and fewer rights than their EU counterparts. That changed in July 2025, when Spain’s National Court issued a landmark ruling confirming that non-EU residents – including British, American, and other international investors – are entitled to deduct rental expenses. This judgment introduces long-overdue parity in rental income taxation and has direct implications for yield optimisation and long-term strategy.

This decision reshapes the landscape for Marbella property investors, offering significant tax savings, potential refunds, and renewed confidence in the Spanish rental market. Below, we explain what this means for non-EU landlords, the deductions you can now claim, and how tax rates apply in 2025.

Rental Income Tax Deductions for Non-EU Owners: The 2025 Ruling

On 28 July 2025,  a judgment in case 636/2021 in the Spanish Audiencia Nacional delivered that established fairer conditions for non European investors in Spain.

Historically, the disparity was stark. Non-EU investors were charged a flat 24% tax on gross rental income, with no right to deduct legitimate costs such as mortgage interest, property management fees, or maintenance. EU/EEA owners, by contrast, paid 19% on net income, benefitting from the ability to offset expenses.

When a US investor challenged a decision by Central Economic-Administrative Tribunal, the National Court ruled that such differential treatment contravenes both international treaty obligations and principles of non-discrimination enshrined in EU law, including Article 63 of the Treaty on the Functioning of the European Union and the non-discrimination clause in the Spain – U.S tax treaty.

Before the ruling:

• Non-EU owners (e.g. U.S., UK post-Brexit, Middle East) were taxed at 24% on gross rental income.
• Non-EU owners could not deduct legitimate expenses, resulting in substantially higher taxes.

After the ruling:

• Non-EU owners are now taxed at 24% on NET rental income.
• Full deductions for rental expenses are allowed, just like EU residents.
• In many cases, investors may reclaim overpayments for the preceding four fiscal years by rectifying their Modelo 210 filings (subject to statute of limitations).
• For many non-EU and U.S. property owners in Spain, this means a 30–40% reduction in tax liability.

For prime rental assets in Marbella and the Golden Mile, the savings are material. Consider a villa generating €200,000 in annual rental income with €50,000 in associated expenses. Previously, the liability stood at €48,000. Under the new framework, that figure is reduced to €36.000- a substantial annual saving that would only increase with more profitable rentals.

Deductible Expenses for Rental Properties in Spain

According to Spain’s Agencia Tributaria (Tax Agency), owners can deduct legitimate rental expenses when declaring rental income, prorated for the period of rental use. Key categories include:

• Mortgage & Loan Interest (Combined with repairs, it cannot exceed annual rental income)
• Property Taxes & Fees, including IBI, Rubbish
• Community Fees
• Repairs & Maintenance (Painting, plumbing, electrical fixes, and general upkeep – not improvements)
• Insurance – Home insurance, rental default insurance, and liability cover.
• Utilities – Water, electricity, gas, and internet ( if paid by the landlord under the lease terms).
• Professional & Management Services / Property management fees / Legal, tax, and agency services.
• Cleaning and tenant services.
• Depreciation (3% annually on building construction value, 10% annually on purchase cost of furniture/furnishings).
• Unpaid Rent –  if unpaid for 6+ months after formal collection or if the tenant is declared insolvent.

Professional tax advice is strongly recommended, especially for larger portfolios.

Claiming rental tax deductions in Spain

Following the July 2025 court decision, non-EU investors must follow Spain’s strict documentation rules to benefit from the tax breaks, taking particular note of the following:

• Proration: Expenses must match rental days (e.g. 300 rental days = 300/365 deductible).
• Invoices (facturas): Only official invoices with VAT are valid.
• Proof of payment: Bank transfers, receipts, and municipal tax bills must be kept.
• Depreciation: Applied only to construction value (not land).
• Repairs vs. Improvements: Routine fixes are deductible; upgrades are not.

How to Claim Overpaid Rental Taxes

If you are a U.S., UK, or other non-EU property owner who has been paying tax on gross rental income, you may be entitled to a refund for the last four years (from 2021 to 2025). Engaging specialist cross-border tax advisors will be essential in quantifying and executing these claims.

To claim a refund of tax on your Spanish rental expenses:-

• Gather rental income records and expense invoices.
• Prepare rectifying returns (Modelo 210) for each affected year.
• Cite the July 2025 National Court ruling and EU law principles.
• Submit online via the Spanish Tax Agency or through a fiscal representative.
• Retain all documentation for at least 4 years in case of review.

Spanish Property Taxes Overview

For a comprehensive overview of Spain’s fiscal environment, we consult our dedicated guide on Living and Taxes in Spain.

But as a summary, key tax obligations for owning Spanish property include:

• Municipal Property Tax (IBI): Local tax calculated on cadastral value, typically between 0.4%–1.1%.
• Imputed Income Tax: Applied to unlet properties, based on 1.1%–2% of cadastral value. Non-residents are taxed at 24% (or 19% for EU/EEA).
• Capital Gains Tax, Inheritance and Gift taxes: when selling or transferring properties.
• Rental Income tax: Rental properties attract 19% tax for EU residents, and 24% for non-EU resident owners.
• Acquisition taxes: When purchasing property in Spain, you can calculate around 10-12% of the sale price in property purchase taxes, including Transfer Tax (ITP) and VAT- consult our Property Buyer’s Guide for full details about purchase taxes.

Other considerations for U.S and other non-European Investors

For American investors, Spain’s 2019 double taxation treaty with the U.S. provides an additional safeguard for U.S. owners, ensuring that income is not taxed twice. Moreover, U.S. expatriates relocating to Spain may benefit from the Beckham Law, allowing for a favourable flat tax regime during their initial years of residency.

It is also worth noting that in early 2025, the Spanish Prime Minister raised the idea of considering imposing a 100% supplementary property purchase tax on non-EU buyers, or a double property tax for non-EU buyers in Spain. This measure is widely regarded as discriminatory under EU law and is not expected to advance, but if it were to, there would be months in the lead-up, and it would only affect purchases from the date it could potentially become law.

Why the July 2025 Ruling Strengthens Marbella’s Market

The Costa del Sol has always offered a compelling mix of lifestyle and investment fundamentals: sustained international demand, a constrained supply of prime real estate, and consistent rental yields. The 2025 tax ruling strengthens this proposition, particularly for U.S. and Middle Eastern buyers who previously bore disproportionate tax burdens.

In essence, the reform enhances net yields, improves investment efficiency, and strengthens Spain’s competitive standing against rival markets such as Portugal’s Algarve or the French Riviera. It is a development that places Marbella in an even stronger position as Europe’s premier destination for luxury real estate.

Conclusion: Spain Becomes More Attractive for Global Investors

The July 2025 decision is more than a technical adjustment; it represents a decisive step towards parity and transparency. For international investors, the Spanish property market is becoming more financially attractive and predictable.

For high-net-worth individuals seeking both lifestyle and investment returns, Marbella offers a unique alignment of advantages: a favourable fiscal shift, robust rental demand, and a globally recognised quality of life.

At MPDunne & Hamptons International, we provide discreet, expert guidance to international clients navigating Spain’s evolving property environment. Whether acquiring, holding, or divesting, our experienced team will guide you on your property investment journey in Marella or the Costa del Sol.