The Spanish prime minister has announced a plan to raise property taxes for non-resident buyers. It remains unclear which taxes this would be based on and it seems unlikely to be passed. However, it has hit the headlines and worried some purchasers, so what can you do about it? Your Overseas Home investigates.
What is the proposed tax?
Spain’s prime minister, Pedro Sánchez, has proposed changes to the tax regime for non-resident property owners in a bid, he says, to improve housing affordability for residents.
No laws have even been officially proposed, let alone passed, as yet, and there are serious doubts whether they ever will. Sánchez has provided no details on how the tax would work or which it would apply to. It is also not known when he will be presenting the proposal to parliament for approval.
Your Overseas Home have spoken to several legal and tax experts and they remain sceptical as to whether the proposal will ever be enacted. However, this is the situation at present.
Who could be affected?
The proposed tax only applies to non-residents. So, if you are a moving to Spain from the UK, USA or any other non-EU country on a visa, such as a digital nomad visa or the non-lucrative visa, you wouldn’t be affected, as you would be a resident and paying tax in Spain.
If you are buying as an EU or EEA citizen you would also not be affected.
There are some hints as to who the tax is targeting in a later speech by Mr Sanchez on 20th September, where he said proposals were targeting those: “just speculating with those homes.” So even if enacted it may not target those buying and using their own holiday homes. British people, as one pointed out, are not buying in areas where there are housing shortages.
Find out what other taxes you must pay as a property owner in Spain
How likely is it that the proposal will be passed?
The proposal, if it ever comes before parliament, will face potential legal challenges under EU non-discrimination rules. If the changes are found to unfairly disadvantage non-residents, they could be contested in the Court of Justice of the European Union (CJEU). A 2014 ruling by the CJEU established that residents and non-residents should be treated equally regarding existing property taxes like the IRFP and income taxes.
The proposal, if it ever comes before parliament, will face legal challenges under EU non-discrimination rules.
“It is important to remember that this is all up in the air and that it is a proposal only,” says Raquel Perez from Spanish law firm Perez Legal. “The rest of the parties have to support this proposal from Sanchez for it to be passed.”
That seems unlikely to happen. The main Spanish purchase tax, ITP, is set by each autonomous community and varies widely, from just 6.5% in expat hotspot the Canary Islands to as high as 11% in other regions. But some autonomous regions are ruled by parties in opposition to Pedro Sanchez’s socialist government and have already said it is discriminatory. They are unlikely to approve the measure.
Who is the tax aimed at?
There are also questions as to who the tax rise would be aimed at. Sanchez said that foreigners were purchasing properties “not to live in, not for their families to live, but primarily to speculate.” He pointed to other countries banning overseas purchases, such as Canada.
It seems likely that any new tax would be more efficiently aimed at large institutional and buy-to-let investors.
In Spain, British buyers were the largest cohort of non-resident buyers, with 3,480 homes bought in the first half of 2024, according to Spanish notaries. However, this is a only 1% of the 340,000 total sales in Spain, and few purchases were in Spain’s biggest cities. It seems likely that any new tax would be more efficiently aimed at large institutional and buy-to-let investors.
Spain’s property tax for non-residents is not yet law
Tips for prospective buyers
If the tax change does go ahead, there are several ways that international buyers can protect themselves.
Buy sooner
It has taken many months for the golden visa scheme to end – you still have until April – and even if went ahead there would be many months or years before this tax rise was enacted. Speak to one of our property consultants today on 0808 252 7870 to kickstart your buying journey. Read our top tips for buying in Spain before any new law can come into operation.
Buy as a resident
In Spain, residency is not the same as citizenship and is much more easily acquired, via a raft of visa options. That includes the non-lucrative visa that most retirees use, the digital nomad visa or various business visas.
There is also the option to buy via a resident in Spain, such as a family member already there. We can put you in touch with a trusted lawyer to help with the process.
Acquire an EU passport
Anyone with a grandparent born in Ireland (the Republic or Northern Ireland) should be able to get an Irish passport. Many US and UK citizens may also claim an Italian passport or a Polish, German or Eastern European passport.
Build your own home
Land is considerably cheaper to buy than an existing property and the tax is from 0.1% to 2%, offering the option to create your own grand design. It could also be that the Spanish government, like the Australian government, offers incentives to overseas buyers building new. For new build property in Spain, the ITP tax is replaced by VAT of 10%, and this may not be raised so as to encourage building which, as some experts have pointed out, is the real solution to Spain’s housing problem.
Conclusion
While it is important to understand the stay up to date, bear in mind that they are not yet law, not even put before parliament.
if you’re considering buying property in Spain:
- Stay informed: follow updates on any legislative developments affecting non-resident taxes.
- Plan your finances: consult a tax specialist to understand your obligations and prepare for potential changes.
- Seek legal advice: work with a solicitor familiar with Spanish property law to navigate any complexities.
If any media outlets would like to speak to Your Overseas Home, please contact Senior Editor Christopher Nye on +44 7711 183581.
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