Spain May Repay Foreigners’ Tax Bills !

The European Commission has formally told Spain to stop applying tax rules that it deems unfair to non-resident homeowners — and warned that Madrid could be hauled before the Court of Justice of the European Union (CJEU) if it doesn’t act.

What’s the dispute?

• Non-residents in Spain who own second homes or holiday properties are being charged an imputed income tax — essentially tax on fictional rental income based on roughly 2 % of the property’s “cadastral value”.

• By contrast, Spanish residents living in their own home aren’t subject to the same rule. The Commission says this creates unequal tax treatment.
• A second concern: when assets are sold in instalments, Spanish residents enjoy a deferral of the capital-gains tax, but non-residents must pay the full amount immediately. The Commission contends this undermines the free movement of capital guaranteed under Article 63 of the Treaty on the Functioning of the European Union (TFEU).

Potential fallout

If the CJEU finds in favour of the Commission, Spain could be mandated to reimburse thousands of foreign owners who’ve paid under the contested rules — including many Brits, Germans, Dutch and Scandinavians.

Timeline & status

• The issue has been flagged by Brussels for some time, with initial formal notice in December 2021 and a reasoned opinion in May 2024.

• Spain now has two months to respond to the latest formal notice — failure to act could mean immediate referral to the CJEU.

Why this matters for you (and our clients)

As a real-estate law firm specialising in foreign clients, this development is critical:

• Clients who are non-resident owners in Spain may have grounds for reclaiming taxes paid under what could be declared discriminatory rules.

• It prompts a review of existing advice and structuring around non-resident property ownership, imputed-income tax, and deferred CGT rights.

• Equally, until a final decision is issued, there remains uncertainty: outcomes, refund eligibility and how far back claims can go will depend on final rulings and Spanish legislative response.

Additional recent developments worth noting

• A pivotal judgement by Spain’s Audiencia Nacional (National Court) in July 2025 recognised that non-EU/EEA non-residents can deduct necessary costs when renting out Spanish property — previously this right had only applied to EU/EEA residents.

• Commentary emphasises that Spain’s imputed-income tax on non-residents (even when they live in the property themselves) is under high scrutiny and may soon change.
• Earlier this year, Spain proposed a 100 % tax on property purchases by non-EU residents as part of broader housing-affordability reforms. While not directly part of this dispute, it shows the government’s broader regulatory pressure on foreign property-holding.

🧭 How SGM Abogados can help

At SGM Abogados, we specialise in advising foreign clients who own, buy, or sell property in Spain.
Our team can:
✅ Review your past non-resident tax payments
✅ Identify possible overpayments or claims
✅ Keep you informed on the EU ruling and how to act if reimbursements are approved

📩 If you’re a non-resident owner, contact us to arrange a personalised review of your situation.
We’ll make sure you’re prepared for any changes and help you protect your rights under Spanish and EU law.