How worried should buyers be about proposed property tax rises in Spain and other measures apparently aimed at deterring international property buyers?
When the Spanish prime minister announced a plan to raise property taxes for non-resident buyers recently it hit the headlines and worried many potential buyers in Spain. It was followed up more threats, including one on banning non-EU buyers entirely. The press then seemed to delight in finding more ways that the Spanish were having a go at international – specifically UK and US – buyers.
So, what are the actual proposals and how worried should people be, especially those who have long-cherished dreams to buy a property in Spain or retire there?
Firstly, the tax proposal.
The story: “A 100% tax on buying”
Fact: Prime minister, Pedro Sánchez, proposed property tax rises in Spain of 100% for non-resident buyers. He said it was part of a larger package to improve housing affordability for residents.
Sanchez said that foreigners were purchasing properties “not to live in, not for their families to live, but primarily to speculate.”
In Spain, British buyers were the largest cohort of non-resident buyers, with nearly 3,500 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.
Who could be affected?
The proposed property tax rises in Spain would only apply to non-residents. So, if you are 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.
Will it even pass?
There are serious doubts as to whether his government could get such a proposal past. Firstly, it would face potential legal challenges under EU non-discrimination rules. A 2014 ruling by the Court of Justice of the European Union (CJEU) established that residents and non-residents should be treated equally regarding existing property taxes like the IRFP and income taxes.
Secondly, says Spanish property lawyer Raquel Perez: “The rest of the parties have to support this proposal from Sanchez for it to be passed.” 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 seem unlikely to approve the measure.
The story: “A ban on non-resident buyers”
Fact: Sanchez went further a week later, suggesting a total ban on non-EU buyers, saying “We will propose to ban these non-EU foreigners who are not residents, and their relatives, from buying houses in our country since they only do so to speculate.” He highlighted other countries banning overseas purchases, such as Canada. However, even in Canada restrictions are limited to big cities, with plenty of exemptions.
However, he was roundly condemned by both his political opponents and many allies, and a spokesperson downplayed the suggestion.
Again, any potential change would need to pass the lower house, where the government’s minority status makes passing new legislation challenging.
The story: “A ban on tourists”
Fact: This headline sounds alarming but is completely misleading. It simply refers to a three-year ban on the registration of any new holiday rental properties. It would not restrict people going to Spain or staying in Spain.
However, it will affect anyone considering renting out their holiday home in Spain. This perhaps gets to the nub of the issue – complaints from local people that all the accommodation is being let out on AirBnb and other platforms.
New entry requirements
However, there is truth in the reports that British visitors will need to provide additional documentation when entering Spain. This is nothing new – such requirements have always been in place and is standard practice for non-EU travellers.
Visitors to Spain may be asked to provide the following:
- A return or onward ticket
- Proof of travel insurance
- Hotel booking confirmation or a letter of invitation
- Proof of sufficient funds (approximately £95 per day)
There is also the long-promised EU entry and exit system (EES), whereby you will be required to register your biometric details, such as fingerprints or a photo, when you arrive. This is the same as the US, Canada and other countries require.
It has been delayed many times, specifically not to delay tourists going to Spain, but is expected to come in this year. The pass will probably costs around €7, but last for three years.
A warm welcome in Spain
Contrary to such headlines about property tax rises in Spain and other restrictions, British property buyers and retirees still receive a warm welcome in Spain, as they have always done.
Smart Currency’s own man in Spain, Clive Smith says: “I’ve been fortunate to live and work in Spain for the last 17 years. If there are two pieces of advice I would give to someone considering a move to Spain or buying a property there, they would be: one, do your research and get guidance and advice from professionals. Do not listen to barstool gossips or media sensationalism. And two, do it! You won’t regret it – I haven’t done once during the past 17 years.”
