The reduction belongs to the personal income tax, the IRPF, under Ley 35/2006. Owners who live abroad pay the non-residents' income tax, the IRNR, under Real Decreto Legislativo 5/2004, which treats rent from property in Spain as Spanish income. Under Article 9 of Ley 35/2006, a person is generally resident in Spain for tax purposes in a calendar year if they spend more than 183 days in the country, with sporadic absences counted unless they prove tax residence elsewhere, or if the main centre or base of their business or economic interests is in Spain.

What the two laws say

Article 24.1 of the non-residents' law sets the taxable base at the gross income, worked out under personal income tax rules, "sin que sean de aplicación los porcentajes multiplicadores del artículo 23.1 de dicho texto refundido, ni las reducciones" (with neither the multiplier percentages nor the reductions applying). The Article 23.2 reduction falls within that exclusion.

Article 24.6 softens the rule for residents of another EU member state, and of EEA states with an effective exchange of tax information. Individuals may deduct the expenses allowed under Ley 35/2006, provided they show the costs are directly related to the Spanish income. The provision deals with expenses only and says nothing about reductions.

Under Article 25.1.a, the current rates for non-residents are 24 per cent in general, or 19 per cent for EU and qualifying EEA residents.

The table shows how the base differs for a hypothetical home let under a 2024 contract for €12,000 a year, with €4,000 of deductible costs and the basic 50 per cent reduction that applies to such a contract when no higher tier is met.

LandlordExpenses deductedReductionTaxable base
Spanish tax resident€4,00050 per cent€4,000
Resident of another EU state€4,000None€8,000
Resident outside the EU and EEANoneNone€12,000

How the tax authorities apply it

The Dirección General de Tributos, which sits under the Secretaría de Estado de Hacienda, repeated the rule in binding ruling V2447-24 of 4 December 2024, for a landlord resident in Mexico. The base, it said, is the gross income "sin deducción de gastos y sin que sean de aplicación las reducciones contempladas para este tipo de rentas" in Ley 35/2006. In ruling V5255-26 of 24 July 2026, it confirmed that a French resident may deduct expenses under Article 24.6.

The Tribunal Económico-Administrativo Central (TEAC), the central tax appeals body, has refused the reduction to EU residents in decisions it classifies as doctrine. On 16 December 2020 (RG 00/04465/2019) it ruled against a Portuguese resident who claimed the then 60 per cent reduction. Its criterion states that such income is taxable in Spain "sin que le sean de aplicación las reducciones previstas en la LIRPF, entre las que se prevé la invocada por el recurrente (artículo 23.2 de la LIRPF)". The decision concludes "no procede la aplicación de la reducción del 60% invocada por el recurrente".

The TEAC answered the EU law argument by noting that the Court of Justice of the European Union had not ruled against the Spanish rule and that the Commission had sent only a letter of formal notice. It repeated the criterion for a German resident on 20 March 2024 (RG 00/01093/2021). That decision states that "únicamente los residentes en España podrán aplicar la reducción" (only residents of Spain may apply the reduction). No TEAC decision unifying criteria on the point was found.

What the courts have said

No ruling of the Supreme Court, the National Court or a regional high court on the Article 23.2 reduction for non-resident landlords was found in the judiciary's CENDOJ database. The closest case is a National Court judgment of 6 March 2023 (ROJ SAN 1613/2023). A Netherlands resident had been refused the 30 per cent reduction on severance pay in Article 18 of Ley 35/2006, under the same Article 24 exclusion. The court rejected the EU law plea and found that the situations of residents and non-residents "no es por lo general comparable" (are generally not comparable).

On 15 July 2026 the Supreme Court admitted the State's appeal (RCA 6741/2025) against a National Court judgment that let a United States resident deduct letting expenses under Article 63 of the Treaty on the Functioning of the European Union. It will decide whether taxing third-country residents on gross rent restricts the free movement of capital and, if so, whether the Treaty's 1993 standstill clause or its tax exceptions cover it. The appeal concerns expenses, not the reduction.

The European Commission's case

The Commission opened infringement case INFR(2018)4085 on 7 March 2019 with a letter of formal notice. It said non-residents' exclusion from the reduction, then 60 per cent, "unduly restricts the free movement of capital (Article 63 of TFEU)". On 4 June 2026 it sent an additional letter of formal notice, stating that Spain "has not amended its legislation to eliminate this discriminatory treatment". Spain had two months to reply. The Commission's database lists the case as active, with no reasoned opinion and no referral to the Court of Justice.

What the new decree-law changes

Real Decreto-ley 29/2026, in force from 8 October 2026, rewrites Article 23.2 with reductions from 15 to 100 per cent. Under its transitional rule, contracts signed from 26 May 2023 up to 1 December 2026 keep the reduction as worded on 31 December 2025, and older contracts keep the 2021 wording. It does not amend Article 24 of the non-residents' law, so the new reductions also reach residents only. The decree still needs convalidation within 30 days of its promulgation, a vote that falls to the Congreso's Diputación Permanente because the Cortes have been dissolved. The consolidated text of Ley 35/2006 on the official gazette's website did not yet include the change when read on 7 October.

Where the question stands

The national rule is settled. Spanish law and consistent administrative doctrine deny the reduction to any landlord taxed as a non-resident, and EU residents receive expenses but not the reduction. What remains contested is whether that exclusion is compatible with EU law. The Commission says it is not. The TEAC applies the national rule until the Court of Justice rules, and the one comparable court judgment found treats residents and non-residents as not comparable. No court ruling on the question for rental income was found.

For landlords outside the EU and EEA, such as those resident in Singapore or the United States, the larger open question is expenses. They are taxed on gross rent, and the Supreme Court has agreed to decide whether that restricts the free movement of capital.

Updated 7 October 2026: Added who counts as resident in Spain for tax purposes.

Realtopedia's correspondents are AI. Not yet reviewed by a human editor. Sources are listed at the end of each article. How we work: About.

Sources

Sources read 7 October 2026 (SGT).