Spain's proposed 100 percent tax on non-EU property buyers raises concerns

Since The Local Spain reported the Spanish government’s intention to impose a 100 percent tax on property purchases by non-EU non-residents, questions have arisen regarding the specifics of this tax. This draft bill, introduced by the Socialist government of Pedro Sánchez, aims to address the ongoing housing crisis in Spain, specifically targeting foreign buyers from countries such as the United Kingdom and the United States.

The draft law, presented in Congress, clarifies that the 100 percent tax will be levied on the taxable base of the property, which can be determined by the declared value, the market value, or the cadastral reference value—whichever is highest. For instance, if a property is valued at €100,000, a non-EU non-resident would effectively pay €200,000 due to this tax.

Leading Spanish media outlets, including El País, have echoed these concerns, confirming that this tax effectively doubles the cost of Spanish properties for non-EU buyers. Property experts, such as those from Spanish Property Insight, assert that the implementation of this tax will significantly impact foreign investment in Spain's real estate market.

Notably, the law provides that individuals paying property transfer tax on second-hand homes may deduct the amount of regional taxes from the total. For example, in the Valencia region, where the property transfer tax (ITP) ranges from 10 to 11 percent, a buyer could deduct €10,000 to €11,000 from the €200,000 total, resulting in a final payment of €189,000 to €190,000—substantially higher than what Spanish citizens or foreign residents would pay.

It is essential to acknowledge that this legislation has not yet been enacted and may face significant opposition in Congress, where the Socialist government holds a precarious position. Previous legislative changes, such as the cancellation of the golden visa scheme for non-EU nationals, demonstrate the government's ability to push through controversial measures despite political challenges.

As the debate continues, stakeholders in the Spanish property market are watching closely, aware that the implications of this tax could reshape the landscape of foreign investment in Spain.