Modelo 210 Guide
Modelo 210: Expense Deduction for UK and Swiss Residents After SAN 3630/2025?
Spain's Audiencia Nacional questions the denial of expense deductions for third-country rental landlords (SAN 3630/2025). What this means for UK, Swiss and US property owners — worked example, standstill clause and practical guidance.
Do you need to file Modelo 210?
As of: July 2026
Traffic light:
- Start documenting all costs thoroughly from now on
- Have non-time-barred years reviewed for rectification potential
- Do not unilaterally file on a net basis without individual legal review
Expense Deduction for Non-EU Owners? The Short Answer
Third-country residents (e.g. in the UK, Switzerland or the USA) must, under the letter of the law, continue to pay tax on their gross rental income in Modelo 210. A ruling by Spain's Audiencia Nacional of 28 July 2025 (SAN 3630/2025, Rec. 636/2021) challenges this unequal treatment on EU law grounds. The case concerned a US tax-resident owner with rental income from a property in Barcelona (tax periods 2016–2018).
Important: Whether an expense deduction is enforceable in any given case depends on further proceedings and has not yet been confirmed by Spain's Supreme Court. The ruling is a strong argument for rectification claims on non-time-barred years — but not a blanket authorisation for all UK, Swiss or US-resident owners.
Why This Matters
Until now, the Modelo 210 rental declaration has followed a clear, statutory distinction (Art. 24.6 LIRNR):
- EU/EEA tax-resident owners pay tax on net rental income — repairs, interest, management fees and similar expenses reduce the taxable base.
- Third-country tax-resident owners — including UK residents since Brexit, as well as those resident in Switzerland or the USA — must under the letter of the law pay tax on gross rental income, with no expense deduction.
For a holiday property with ongoing maintenance costs, this difference can amount to several hundred euros per year. The Audiencia Nacional ruling challenges this unequal treatment on EU law grounds — without yet eliminating it by statute.
Legal Basis: What Did the Audiencia Nacional Decide?
The claimant, tax-resident in the USA, declared rental income from a property in Barcelona for the years 2016 to 2018 via Modelo 210. The Spanish tax administration and initially the TEAC (Tribunal Económico-Administrativo Central) refused the deduction of her expenses — citing Art. 24.6 of the IRNR Act, which expressly limits the expense deduction to taxpayers resident in the EU or EEA with effective information exchange.
The Audiencia Nacional disagreed. In the court's view, it was not justified in this specific case to deny the expense deduction, provided a direct economic link between costs and rental income could be demonstrated. The judges relied centrally on Art. 63 TFEU (free movement of capital), which under settled CJEU case law also applies vis-à-vis third countries. The claimant additionally invoked the non-discrimination clause of the Spain–USA double taxation agreement.
Legal uncertainty to be aware of: The so-called standstill clause (Art. 64(1) TFEU) allows EU states to maintain capital movement restrictions vis-à-vis third countries, provided these already existed on 31 December 1993 and concern direct investments — including real estate investments. Spain's general restriction on deductions for non-resident landlords did indeed exist before that date (Art. 18 of Ley 18/1991). What remains open, according to specialist commentators, is a different question: whether renting out a property qualifies as a "direct investment" within the meaning of the clause — and precisely this was not examined in depth in the Audiencia Nacional proceedings. This question is likely to be the central point of contention if the case reaches the Tribunal Supremo; some specialists even consider a preliminary reference to the CJEU probable. The ruling is therefore significant and directional, but not yet a final, risk-free legal position.
In plain terms: The standstill clause is a form of grandfathering for old rules. The EU says in effect: the free movement of capital generally applies to third countries too — but if a restriction already existed before 1994 and concerns direct investments, a country may keep it. Whether a rented holiday apartment counts as a "direct investment" in this sense is precisely the point that neither the Audiencia Nacional nor any other court has conclusively settled.
Worked Example: Mallorca
Scenario comparison: Swiss tax-resident owner, rental in Port Andratx
- Tax residence: Switzerland (third country → 24% tax rate)
- Property: holiday apartment in Port Andratx, rented year-round
- Annual rental income: €18,000
- Documented, directly attributable costs (maintenance, management, local taxes): €4,000
Current legal position under the letter of the law (gross basis): Taxable base = €18,000 → Tax = €18,000 × 24% = €4,320
Hypothetical scenario, if the reasoning from SAN 3630/2025 applies in your own case (net basis): Taxable base = €18,000 − €4,000 = €14,000 → Tax = €14,000 × 24% = €3,360
Difference in the example: €960 per year — purely hypothetical, if the reasoning applies in your case and is upheld on appeal. Over several non-time-barred years, the potential difference is correspondingly larger.
Note: The 24% tax rate itself is unaffected by this ruling — the case concerns exclusively the taxable base (gross vs. net), not the rate.
Common Mistakes / What Goes Wrong
- Mistake 1: Owners assume the ruling applies automatically and across the board to all third-country cases — in reality, the Audiencia Nacional decided a specific individual case, and the AEAT does not apply the reasoning of its own accord.
- Mistake 2: Rectification claims are submitted without proper cost documentation — without a direct, documented economic link to the rental, a claim is typically rejected.
- Mistake 3: Confusion with the tax rate — the ruling does not change the 24% rate for third-country residents; it only concerns the taxable base.
- Mistake 4: The standstill issue (Art. 64 TFEU) is overlooked — the open question of whether rental constitutes a "direct investment" is the point at which a later decision could go the other way.
From Practice with Third-Country Rentals
In rental cases with a third-country dimension, a common pattern emerges: owners often only notice the gross-basis disadvantage when comparing their tax burden with that of an EU-resident neighbour. And many do not know that a retrospective rectification (rectificación de autoliquidación) is generally possible for non-time-barred years — provided costs are properly documented.
Does This Ruling Affect Me? → Check the Scenario Comparison
Are you tax-resident in the UK, Switzerland or another third country and rent out a property in Mallorca? → See in a few minutes how your tax burden differs under both scenarios.
The calculation shows a scenario comparison for orientation. Whether an expense deduction should be claimed in a specific third-country case is a legal question — Fiscaro currently recommends individual tax review for this.
What Does This Mean in Practice for Owners?
For third-country tax-resident owners with rental income in Spain, this means:
- It is worth documenting ongoing costs (repairs, management, local taxes) thoroughly from now on — regardless of the outcome of a possible cassation appeal.
- A review of non-time-barred periods (general limitation period under the LGT: four years from the end of the relevant filing deadline, subject to special periods in individual cases) may be worthwhile where deductible expenses are significant.
- Until the matter is settled by the Supreme Court, each rectification claim should be assessed on its individual merits — blanket expectations are misplaced here.
All current deadlines at a glance: Modelo 210 deadlines
Comparison: Current Law vs. Possible Scenario After SAN 3630/2025
| EU/EEA-resident owners | Third-country-resident owners (letter of the law) | Third-country-resident owners (scenario after SAN 3630/2025) | |
|---|---|---|---|
| Taxable base | Net (after expenses) | Gross (no expense deduction) | Gross remains legally mandatory; net currently only enforceable via individual objection/litigation |
| Tax rate | 19% | 24% | 24% (unchanged) |
| Refund possible? | – | – | Yes, for non-time-barred years, subject to case-by-case review |
| Legal certainty | settled | settled (letter of the law) | not yet confirmed by Supreme Court; standstill question (Art. 64 TFEU) open |
FAQ
Does the ruling also apply to UK or Swiss-resident owners, not just the US case? The ruling itself concerns a US tax-resident owner. The underlying reasoning is not inherently limited to US cases, but a definitive statement for UK or Swiss cases will only come with further case law.
Do I need to file a rectification claim immediately? Not necessarily immediately, but keep the limitation period in mind: rectification claims are generally only possible for the last four non-time-barred years (Art. 66 LGT).
Does my tax rate change from 24% to 19%? No. The ruling concerns exclusively the expense deduction (taxable base), not the tax rate.
What is the standstill clause, and why does it matter? Art. 64(1) TFEU allows EU states to maintain capital movement restrictions vis-à-vis third countries that already existed on 31.12.1993 in respect of direct investments. Whether a rented property qualifies as such a direct investment remains open — this was not examined in depth in the proceedings and is likely to be the most probable point of challenge in any cassation appeal.
Does the ruling also apply to holiday rentals via platforms such as Airbnb or Booking.com? The ruling does not differentiate by rental channel. The underlying question (expense deduction on rental income) applies in principle to any form of rental, regardless of booking platform — but an explicit statement on short-term lets has not yet been made.
What costs would potentially qualify? Based on existing EU/EEA practice, typically repairs, management costs, interest, insurance and comparable expenses with a direct, demonstrable link to the rental — individual review remains necessary.
Sources
- Audiencia Nacional, Sala de lo Contencioso-Administrativo, Sección Segunda, Sentencia of 28.07.2025, Rec. 636/2021 (SAN 3630/2025)
- Art. 24.6 Ley del Impuesto sobre la Renta de no Residentes (IRNR)
- Art. 63 and Art. 64(1) TFEU (Treaty on the Functioning of the European Union)
- Art. 66 Ley General Tributaria (LGT)
Conclusion
The Audiencia Nacional ruling is a significant milestone for third-country residents — but not yet a final legal position, as long as the standstill question has not been settled by the Supreme Court. If you are tax-resident in the UK, Switzerland or another third country and rent out property in Mallorca, you should monitor developments and document costs thoroughly from now on.
→ See with the Fiscaro tax calculator how your Modelo 210 declaration differs under both assumptions.
Christopher Deppe Founder of Fiscaro Real Estate Economist | Dipl.-Wirtschaftsingenieur (FH) Managing Director, DC Finest Real Estate Mallorca Active in Mallorca for over 15 years
Hanns-Christopher Deppe
Founder of Fiscaro · Real Estate Economist & Dipl. Industrial Engineer · Agent in Mallorca
Hanns-Christopher has lived in Mallorca for over 15 years and has guided hundreds of non-residents through their Spanish tax obligations. He founded Fiscaro to make the Modelo 210 process as simple as possible.
This article is for general information purposes only and does not constitute individual tax advice. For an assessment tailored to your specific circumstances, we recommend consulting a qualified tax adviser or Spanish gestoría.
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