News about taxation for tax residents in Andorra with properties in Spain 2025

Good news on taxation for tax residents in Andorra with properties in Spain 2025.

The recent ruling by the National Court on 28 July 2025 (SAN 3630/2025) brings a very significant change for those who reside outside the European Union and own property in Spain. Until now, a resident of Andorra who rented out their flat in Barcelona, Madrid or the Costa del Sol had to pay IRNR (Non-Resident Income Tax) on the gross rental income, without being able to deduct a single euro for maintenance, repairs, community fees or mortgage interest.

On the other hand, residents of the EU or the European Economic Area were able to deduct these expenses. The result was clearly unequal treatment, which many specialists had criticised as unfair and inconsistent.

The National Court has corrected this approach. The case that led to the change involved a US citizen who claimed to deduct her expenses related to renting a flat in Barcelona. The Tax Agency and the TEAC (Central Economic-Administrative Court) had told her no, but the court overturned those rulings and recognised her right to apply the deductions.

The key lies in the free movement of capital, a basic principle of European Union law that also applies in relations with third countries. If a property is located in Spain and generates income in Spain, there is no reason to discriminate against its owner simply because they live outside the EU. Furthermore, Spain and Andorra have an agreement to avoid double taxation, which further reinforces the argument that there is sufficient fiscal control to ensure correct taxation.

What does this mean for a tax resident in Andorra?

It’s very simple: if a tax resident in Andorra owns property in Spain, they may consider reviewing their IRNR self-assessments (form 210) for recent years and requesting a refund of any overpayments, provided they do so within the limitation period. For those who bear mortgage, insurance, renovation or management costs, the difference can be significant and considerably reduce their tax burden.

The court is also sending a clear message to Spanish lawmakers: if they do not update the law to extend this right to all non-residents, more and more claims will be filed. On a practical level, this equal treatment strengthens the competitiveness of the Spanish property market, making it more attractive to investors from Andorra and other non-EU countries.

In short, SAN 3630/2025 opens the door to a fairer system, where residents of Andorra can be on an equal footing with EU citizens when investing in property in Spain.

If you live in Andorra and own properties in Spain, you can contact us via the contact form on the website for more information.