Spain Plans to Increase Tax on Property Purchases for Non-Residents and Non-EU Citizens

Spanish Prime Minister Pedro Sánchez reported that Spain is preparing to implement a 100% tax on property purchases made by non-EU buyers and non-residents of the state as a measure to combat the national housing crisis.

The residential issue has become so acute that local residents complain they are not able to afford housing for themselves. Rising inflation and interest rates, combined with slow tempo of construction of new residential buildings, result in a lack of affordable properties to rent or buy. As such, the government considers the possibility of limiting the number of foreign property purchases by a dramatic raise of a tax burden.

In a Madrid economic forum on January 13, Sánchez presented the 12-step plan to alleviate the housing problem. Apart from 100% purchase tax increase, it is also proposed to introduce a tax rate for tourist apartments throughout the country at least comparable to that of other economic activities, such as VAT applied to tourist rentals. This will also be a step in line with the current changes brought forward by the new EU directive on VAT.

Sánchez commented: “The West faces a decisive challenge if it wants to avoid becoming a society divided into two classes: rich landlords and poor tenants… In 2023 alone non-European Union residents bought around 27,000 houses and flats in Spain. And they didn’t do it to live in them, they didn’t do it for their families to have a place to live, they did it to speculate, to make money from them, which we – in the context of shortage that we are in – obviously cannot allow.”

The biggest purchasers of Spanish immovable property are Americans, British and Moroccans, with the number of Venezuelan and Mexican buyers also growing in recent years.

Opponents to the plan are afraid that while such tax limitations are beneficial to the local population, they may harm the country’s tourism sector, major contributor to its economy.

The details of the tax increase proposal, as well as the dates of its approval, are currently unknown.