Spain's proposed property tax of up to 100% for non-EU buyers: What we know

Is it true Spain is planning a 100% tax on non-resident homebuyers from outside the EU? And will Spain really try to ban non-EU citizens from buying property at all? Recent reports in the world's media have sparked concern about whether buying a Spanish holiday home is a good move – but these worries may well be unfounded. So, let's sort the facts from the frenzy.

The short answer is: We don't know. At the moment, these are only ideas floated by Spanish president Pedro Sánchez – nothing is confirmed and, as we will explain, it seems unlikely any such moves will go ahead. At least, not in the way future holiday home owners fear.

What has Spain said about foreigners buying property here?

In a bid to address a nationwide problem of the average working adult or family being unable to afford to buy or rent a home in specific 'property hotspots', Pedro Sánchez of the centre-left socialist party (PSOE) has put forward an 11-point strategy.

Among these 11 ideas are waivers of up to 100% on income tax for owners of unoccupied properties to offer them for rent at affordable prices; higher taxes for non-resident buyers, and limitations on non-residents buying property at all.

Why are these limitations aimed at non-EU buyers?

As a European Union member State, Spain is not allowed to impose any tax burdens on buyers from other EU member States that would not apply to Spanish people. Doing so would undermine one of the fundamental pillars of the EU: that of free movement of capital, or money, between the 27 member countries in the bloc. But since Brexit, the UK is affected by any new laws targeting non-EU citizens – which has created some alarm among would-be British holiday home owners or those planning a future retirement in Spain.

Does it mean expats in Spain could be charged extra for buying a home?

No. The proposal only applies to property buyers who are not living in Spain and do not intend to apply for residence in the foreseeable future. British, US and other non-EU citizens who already call Spain their permanent home cannot be charged extra taxes simply for 'being foreign'.

Can Spain really tax foreign buyers at 100%?

Even assuming president Sánchez's ideas gain near-unanimous support in Parliament – which is in serious doubt – legal factors, at national and EU level, could well prevent them becoming reality. Also, economists and property market professionals have warned these moves could be very dangerous, as well as ineffective.

We'll explain more about this below – but, firstly, let's look into why Sánchez appears, as the global media claims, to be 'targeting foreigners'.

Why foreign-buyer tax hikes have been mentioned: A background

It's no secret that certain hugely-popular areas of Spain are facing a housing crisis: rent has gone up significantly and property values have increased since the financial crisis.

And they needed to: a property market crash saw home values drop by an average of 30% - up to 70% in many cases - from 2008 to around 2013, leaving owners with mortgages in negative equity.

Since then, the minimum wage has risen by unprecedented levels and Spain's financial security has improved, leaving the property market in a much healthier place.

But it's also caused dramatic spikes in demand for homes in areas with the most job opportunities, such as Madrid and Barcelona, and in coastal tourism belts, like the provinces of Málaga, Alicante and Valencia, and the Balearic and Canary Islands.

Demand drives prices up, and tourism means buying a coastal or city property and letting it to holidaymakers can be a great investment: Owners can charge far more than for a year-round tenant. Consequently, housing in these hotspots has become scarce and, where available, prohibitively expensive.

During the recession, Spain had a glut of newly-built, never-owned homes, meaning few new properties have been constructed since, leading to a current shortage.

Pedro Sánchez wants every resident in Spain to have somewhere they can afford to call home. To address spiralling prices and low availability, he wants to discourage wealthy investors from buying properties to make money from, rather than to use. The proposed 100% tax is designed as a deterrent.

Legal reasons why a 100% tax on foreign buyers may not happen

Existing national legislative framework would seem to block the proposed tax burden or non-resident buyer ban from the outset. Additionally, EU law always takes precedence over national law – and existing EU law is in direct conflict with Sánchez's 'plans' in their current state. Let's look at how this works.

Firstly: Parliament and the Senate may not agree

Right now, it's just an idea. Hundreds of 'ideas' are proposed in government every year, and not many become reality: As a president, you can't just change the rules because you want to. And proposals raised in Parliament are designed to start out as a debating point – even if they do become law, they will incorporate feedback from all other MPs.

Pedro Sánchez's PSOE party is in a minority in Parliament, meaning every single proposed new law needs cross-party support. Without a majority vote in favour, nothing will happen – and several parties in Parliament have already expressed opposition to any ban or limitation on foreign buyers, or any extra taxes.

Once approved in Parliament, a new law or existing law reform has to be examined and signed off by the Senate, before being sent back to Parliament for amendment. Again, the PSOE is in a minority in the Senate, so there is no guarantee any of its proposed legislation would pass this hurdle.

Secondly: It's incompatible with Spanish tax structures

Buying a property in Spain – even if you're Spanish and it's your main home – is already taxed. New builds attract value-added tax (IVA,known as VAT in the UK and USA) at 10%. Pre-owned properties attract an asset transfer tax (impuesto de transmisiones patrimoniales,or ITP) of between 6% and 11% of the purchase price.

IVA cannot be increased to 100% for specific buyers. It is a tax that applies to the item, not the purchaser. Even if IVA on a new build went up to the top band of 21%, it would be in place for all buyers, irrespective of residence status or nationality.

The ITP tax is administered and set by regional governments – not by Spain as a State. Regional governments do not take kindly to perceived attempts to encroach upon their powers, and the State cannot legally reduce these regional powers – they are enshrined in Spain's Constitution.

Even if certain regions decided to increase ITP, others – run by different political parties - would not, meaning non-resident buyers would simply choose another area of the country. This would render any change ineffective for its intended purpose.

Spokeswoman for the Register of Fiscal Advisor Economists (REAF) – part of Spain's General Council of Economists – Raquel Jurado says the Spanish president does not have control over existing tax régimes on pre-owned homes and, even if he did, a significant hike in it would mean non-resident, non-EU buyers would merely opt for a new build instead in order to avoid it. And these buyers are typically attracted more to new builds, anyway.

According to Sra Jurado, the only way for president Sánchez to increase rates to 100% on non-resident home purchases would be to create a special tax. This would be in addition to IVA on new builds or ITP on pre-owned homes. But, as she recalls: “You can't – at least in theory – tax something that's already taxed.”

Thirdly: The Treaty of Europe would probably not allow it

It is unclear whether the European Union would allow 'deterrent taxes' on non-resident property purchases, and it would be unlikely to support a foreign buyer ban. Some member States – notably Denmark and The Netherlands – have imposed stringent limitations on non-EU buyers, but they are not banned altogether. And the European Court of Justice (ECJ) already said, nearly two years ago, that these limitations are only permitted in response to 'compelling reasons of public interest'.

Back in March 2023, European Commissioner for Financial Services, Financial Stability and Capital Market Union, Mairead McGuinness responded to a question by MEP Rosa Estaràs – a member of the right-wing PP party in the Balearic Islands – that, according to Article 63 of the Treaty of Europe, restrictions on 'capital acquisitions of fixed assets' by non-residents are 'prohibited'.

These 'capital acquisitions' include residential property – and Article 63 does not just apply to EU citizens. It also bans 'restrictions on capital movement between member States and between member States and third countries'.

Practical reasons why a 100% property tax seems unlikely

Even if legal instruments could be found or created to put Sánchez's proposals in place, there are practical barriers to its introduction – and to whether it would even work. Let's look at some of these.

Firstly: Non-resident, non-EU buyers make up just 2.6% of property purchases

The sole purpose of a 'deterrent tax' or 'buyer ban' is to free up homes for residents and contain prices. So, if the proposals are not actually going to achieve this aim, they would be deemed unnecessary.

And official figures already cast doubt on whether they would work. Professor Joan Carles Amaro of Barcelona's ESADE Business School says: “Making it harder for non-EU citizens to buy property will not automatically result in cheaper homes, since the percentage of these buyers is very low.”

Whilst Pedro Sánchez says that, 'in 2023 alone', around 27,000 Spanish homes were bought by non-EU citizens 'not to live in, but to speculate and make money from', property market analysts have put this into perspective.

In the last three months of 2024, a total of 24,700 homes in Spain were bought by non-Spaniards, including EU citizens and permanent residents, representing only 15% of all property purchases in the country in that time. British nationals accounted for 8.5% of foreign buyers – ahead of German, Moroccan, Polish and Italian citizens, according to data from the College of Registrars and quoted in Europa Press. Three of the top-five buyer countries are in the EU.

The total number of residential properties in Spain exceeds 26 million, states Antonio de la Fuente, managing director of Colliers. Quoted in the Financial Times, he said the 27,000 Sánchez cited are 'a drop in the ocean'.

And the General Council of Notaries – who have to witness all property purchase contract signings in Spain – state that the 2023 total for non-resident third-country buyers was 16,715, out of nearly 639,000 home purchases.

This equates to just 2.6% of all homes bought that year, whilst 79% of purchases were made by Spanish nationals.

Secondly: Other than 'golden visa' applicants, most non-resident foreigners merely bought holiday homes

The majority of non-resident foreign buyers, both EU and non-EU citizens, were seeking holiday homes for personal use – not to speculate with, according to reports in La Información.

They were mainly British, US nationals, Russians, Ukrainians, Chinese, Argentinian, Moroccan, Colombian, Venezuelan and Ecuadorian, in that order, the General Council of Notaries reports. Of these, a significant minority did so in order to acquire a so-called 'golden visa', which is automatically granted to third-country nationals who spend at least €500,000 on a property in Spain.

With the 'golden visa' system set to be axed from April 3rd, investors from abroad buying Spanish homes purely to gain instant residence will no longer be able to do so anyway.

Studies by CaixaBank Research have revealed that the vast majority of non-EU citizens purchasing property in Spain are, in fact, residents, or soon intend to be – and that both EU and non-EU foreign buyers have 'helped the Spanish housing market maintain its stability'. National buyers have reduced in number due to rocketing mortgage interest rates, meaning current or potential foreign residents have been critical in keeping the market afloat: They bought 30.7% more Spanish homes in the first nine months of 2024 than they did in the same period in 2019.

Thirdly: Non-resident foreign buyers do not normally opt for 'affordable housing'

A slightly more emotive report in the Catalunya-based newspaper El Liberal called the 100% tax idea 'madness'.

"Blaming the average Brit, who wants to buy a €300,000 villa to retire in for the lack of accessible housing is not based upon statistics," it says, adding that non-resident third-country nationals usually bought 'high-class, high-priced' property 'in very specific areas, such as the Balearics and Canaries'.

Estate agencies in the Balearic Islands agree. The proposed law 'will not help local residents', they say, since those are 'seeking cheap homes to rent, not luxury villas'.

Whilst housing-crisis hotspots do include the Balearic and Canary Islands, where non-resident foreign buyers accounted for 31.5% and 28.6% respectively in 2023, another major one is Madrid, where they accounted for just 6.3%.

Essentially, those Sánchez wants to tax at 100% typically seek properties in a different league to the type of affordable average family home Spain is short of. And the kind of buyer Sánchez hopes to deter – ultra-high net-worth speculative investors – are the least likely to be put off by a 100% tax.

"Properties purchased by the typical non-EU homebuyer, mainly British or American, are, on average, 113% more expensive than those acquired by Spanish nationals," says Economía Digital.

Another consideration is that, if the tax only applies to private individuals, then determined buyers could avoid it by setting up limited companies in EU member States, Economía Digital concludes.

Fourthly: Spain could simply build more homes

Demand for affordable housing, says Economía Digital, mostly affects a small number of hotspots due to ineffective economic distribution. Heavy concentration of job opportunities and wealth in a few large cities creates excess local demand and insufficient supply of residential property.

“Between 2008 and 2022, the 1.53 million homes under construction [not necessarily completed] was far lower than the 2.4 million new households created,” the publication states.

“Spain has built one of the lowest numbers of homes per capita in Europe […] in 2022, it was at the bottom with just 2.3 new builds started per 1,000 adult inhabitants.”

Should I put off buying a Spanish home just in case?

If you're a non-EU national hoping to buy a Spanish holiday home and, maybe, later, live in it, there's a clear consensus among legal and financial experts: Don't put it off just to 'wait and see'. And certainly don't rule Spain out on the basis of a proposed tax which has limited public support, or a proposed buyer ban that is unlikely to be permitted.

It takes time for a new law to come into force after it's approved, so you'll have plenty of warning and time to plan. It is highly likely that only property purchase contracts exchanged after the announced 'effective-from' date will be affected: Any signed before then will very probably be exempt.

Once you've bought your property in Spain, you cannot then be forced to pay a tax that did not exist, or was lower, at the time you purchased it.

As is the case with the 'golden visa', an end date has been announced – April 3rd, 2025 – but any qualifying applications submitted on or before April 2nd will be honoured. The same will almost certainly apply if the new tax régime does, against the odds, gain sufficient Parliamentary approval.

If you are determined to become resident in Spain eventually anyway, you might want to do so before buying your home. You may have decided to move to Spain after finding the right property – but this means you will be treated as a non-resident buyer.

By contrast, if you move to Spain first and obtain residence before looking to buy a home, you can only be charged the same level of tax as any Spanish national. Spanish law does not permit financial discrimination against any resident purely based on where they're from.

Foreign residents and holidaymakers have always been welcome in Spain, despite what you may have read, and the country has a very long tradition of selling homes to non-nationals. The buying process is relatively straightforward, and the range of prices and property types is vast. Plus, there's no harm in looking, is there? Our property for sale section is the ideal place to start planning your Spanish homeowner journey.