EU warns Spain on unfair tax regime for non-resident landlords
Sara White, Editor, Business & Accountancy Daily
European Commission orders Spain to end two-tier tax regime where non-resident landlords cannot access 60% tax relief on income from letting properties
After six years of inaction on the part of Spain to address the issue, the European Commission has sent a sternly worded notice to the government.
Currently only Spanish resident landlords can claim a 60% deduction on rental income, while there is no tax relief for non-residents renting out property in Spain.
This issue was first raised by the EU authorities in 2019, but the Spanish government failed to take action to equalise the tax rules and doubled down on existing rules in the intervening period.
Now, seven years later and after inaction, the Commission has sent Spain a follow-up letter of formal notice stating that they are discriminating against non-residents who cannot benefit from a tax reduction on income from letting dwellings in Spain.
Spain has two months to respond or further action may be taken to bring it in line and ‘address the shortcomings raised by the Commission’.
A first letter of formal notice was sent to Spain in March 2019 on this issue, but now this has been escalated with the risk of the Commission going to the European Court of Justice (ECJ) for a ‘reasoned opinion’.
The Commission stated: ‘This difference in tax treatment entails a restriction to the free movement of capital (Article 63 TFEU).
‘Despite further exchanges with the Commission, Spain has not amended its legislation to eliminate this discriminatory treatment and has introduced new features to this tax regime.
‘These 2025 amendments to the relevant tax legislation entail that only residents enjoy reductions between 20% and 90% of the tax base derived from the letting of dwellings, still discriminating non-residents.
‘In the absence of a satisfactory response, the Commission may decide to issue a reasoned opinion.’
