The European Commission has formally called on Spain to review its tax rules for landlords, arguing that the current system unfairly disadvantages non-residents who let property in the country.
Under the existing regime, landlords who are tax resident in Spain can benefit from a 60% reduction on qualifying rental income from residential properties. However, non-resident property owners are generally unable to access the same relief, resulting in a higher effective tax burden on their rental profits.
The dispute is not new. The Commission first raised concerns with the Spanish authorities in 2019, questioning whether the differing treatment of resident and non-resident landlords was compatible with EU law. Despite ongoing discussions between the two sides, Spain has not amended its legislation to remove the distinction.
The matter has now escalated, with the Commission issuing a further letter of formal notice. According to the Commission, the current rules continue to place non-resident landlords at a disadvantage and may breach EU principles relating to the free movement of capital.
Spain has been given two months to respond to the concerns raised and explain how it intends to address the issue. Failure to provide a satisfactory response could lead to further action, including the possibility of the Commission issuing a reasoned opinion, which is often the next step before referral to the European Court of Justice.
The Commission stated:
“This difference in tax treatment entails a restriction to the free movement of capital (Article 63 TFEU).”
It added:
“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.”
The Commission also highlighted that changes introduced during 2025 expanded tax reductions available to Spanish residents, with reliefs ranging from 20% to 90% of qualifying rental income, while non-resident landlords remain excluded from these benefits.
According to the Commission:
“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.”
The statement concluded:
“In the absence of a satisfactory response, the Commission may decide to issue a reasoned opinion.”
The outcome will be closely watched by property owners across Europe, particularly those who own and let residential property in Spain while living in another country. Should Spain ultimately be required to amend its rules, the changes could have significant implications for the taxation of non-resident landlords and the attractiveness of Spanish property investment.
