Spain Taxes: Higher Burden for Non-Resident Property Buyers

Spain is considering a bold step to address housing affordability by proposing a series of measures aimed at regulating the real estate market. Among the most impactful is the potential increase in Spain taxes for non-resident property buyers from outside the European Union.

This proposed policy is part of a broader initiative by the Spanish government to ensure that housing remains accessible to its citizens and residents. Here’s a detailed look at what this means and its implications for the real estate market.

The Proposed Tax Policy for Non-Residents

One of the headline announcements in Spain’s housing reform is the proposed imposition of a tax hike on non-resident, extracomunitarian property buyers. Under the suggested rules, these individuals could face a tax increase of up to 100% of the property’s value. This measure aims to deter speculative investments that often inflate housing prices in areas with high demand.

Why Is Spain Considering Increasing Taxes for Non-Residents?

Spain’s housing market, particularly in coastal regions and urban centers, has been under significant pressure due to the growing interest of foreign buyers. These buyers, often with greater purchasing power, have driven up property prices, making it difficult for locals to access affordable housing.

Key reasons for the proposed tax hike include:

1. Curbing Speculation: Many foreign investors purchase properties as speculative investments, leaving them unoccupied or using them as short-term rentals. This practice reduces the availability of long-term housing.
2. Protecting Local Buyers: The proposed tax aims to level the playing field for Spanish citizens and residents by reducing competition from wealthier international buyers.
3. Promoting Housing Affordability: The measure is designed to stabilize prices and encourage the availability of affordable housing, particularly in areas with high demand.

Who Would Be Affected?

The proposed tax policy targets non-EU buyers who are not residents in Spain. This includes:

• Individuals looking to purchase second homes or vacation properties.
• Investors aiming to enter Spain’s lucrative rental market.
• Speculative buyers intending to flip properties for profit.

Notably, EU residents and Spanish citizens living abroad would not be subject to this increase.

When Are You Considered a Tax Resident in Spain?

You are considered a tax resident in Spain if you meet any of the following conditions:

• You spend more than 183 days in Spain during a calendar year.
• Your primary professional or economic activities are based in Spain.
• Your immediate family resides in Spain.

Tax residency is essential as it determines your tax obligations, including whether you are subject to taxation on your worldwide income or only on income generated in Spain.

Potential Implications for the Real Estate Market

1. Impact on Foreign Investment: Spain has long been a popular destination for international property buyers, particularly in regions like the Costa del Sol, Balearic Islands, and Barcelona. The proposed tax hike could lead to a decline in demand from non-resident buyers, especially those seeking properties for investment purposes.
2. Potential Price Adjustments: By reducing speculative purchases, the government hopes to stabilize or even lower property prices in high-demand areas, making housing more accessible to locals.
3. Shift in Market Dynamics: The measure could lead to an increased focus on long-term residential housing projects rather than luxury developments targeting international investors.

Additional Measures

The proposed tax increase is part of a larger housing reform package that includes:

• Public guarantees for rental payments to encourage landlords to offer affordable leases.
• Rehabilitation programs to convert vacant homes into affordable rentals.
• New regulations on short-term rentals to address market saturation and fraud.
• Expansion of public housing projects, with thousands of units to be added from public land and Sareb assets.

Conclusion

Spain’s proposal to increase taxes on non-resident property buyers represents a significant shift in its approach to managing the housing market. For those considering investing in Spanish real estate, it’s essential to understand these potential changes and adapt strategies accordingly.

Current regional tax rates for second-hand property purchases

Region	General Tax Rate	Reduced Tax Rates

Andalucía

7%

6% for habitual residence under €150,000. 3.5% for buyers under 35, victims of domestic violence or terrorism, or for properties in certain municipalities.

Aragón

Up to €400,000: 8%.

50% reduction for habitual residence for large families. 12.5% reduction for habitual residence for under 35s, persons with over 65% disability, and women victims of gender violence.

Asturias

Up to €300,000: 8%.

3% for public protection housing used as a habitual residence.

Balearic Islands

Up to €400,000: 8%.

4% for habitual residence under €270,151.20 if the buyer has no other property. 2% for specific protected housing.

Canarias

6.5%

5% for habitual residence meeting specific legal requirements. 1% for specific public housing transactions.

Cantabria

9%

7% for properties under €200,000. 4% for habitual residence for large families, single-parent families, people with 33%-65% disabilities, or those under 36.

Castilla y León

8%

4% for habitual residence if income limits are met and the buyer is under 36, a large family, has a 65% disability, or if the property is protected housing.

Castilla-La Mancha

9%

6% for habitual residence under €180,000. 3-5% for properties in depopulated areas. 5% for first-time buyers under 36, families with a 65% disability, or large families.

Catalonia

Up to €1,000,000: 10%.

5% for buyers under 32, those with over 65% disability, or large/single-parent families purchasing a habitual residence.

Comunidad Valenciana

10%

8% for first-time protected housing buyers under 35. 4% for special protected housing and habitual residence for large/single-parent families or disabled buyers.

Extremadura

Up to €360,000: 8%.

7% for habitual residence under €122,000 if income does not exceed €19,000 (€24,000 joint filing). 20% bonus for under 35s, large families, or disabilities over 65%.

Galicia

8%

6% for housing in low-population areas. 3% for large families, under 36s, people with over 65% disability, or victims of gender violence.

Madrid

6%

4% for habitual residence for large families if requirements are met.

Murcia

8%

3% for habitual residence for those under 40 with taxable income under €40,000.

Navarra

6%

5% for habitual residence if taxable income is under €180,304 or for families with two or more children.

País Vasco

4%

2.5% for large families, housing under 120 m², habitual residence, or first-time buyers.

La Rioja

7%

3-5% for habitual residence for large families. 5% for protected housing for under 36s or persons with disabilities.