Recent news that Spain’s government is pushing ahead with plans to impose a 100 percent tax on some foreign property buyers has worried many with plans to move to Spain or buy a second home here. So which foreigners exactly would be affected by this?
In late May, Spain’s ruling Socialists confirmed their plans to introduce a 100 percent property tax on home buyers from overseas as a means of addressing the country’s housing crisis.
The measure was initially suggested by Prime Minister Pedro Sánchez in January, but what many believed was just political posturing at the time seems to be closer to reality now that the PSOE government has officially registered the proposal in the Spanish Congress (it will still require parliamentary approval).
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When it was first announced at the start of the year, nobody knew exactly how this 100 percent tax would work as there was no legal text to go on.
Now that the proposal is in writing and available for all to see, we’ve been able to confirm that the 100 percent would be applied to the taxable base of the property (the value of the property) and is not a 100 percent tax on the existing property tax on second homes (ITP) as many wrongly assumed.
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The same doubts have arisen when it comes to who exactly would have to pay the tax. Is it just non-EU foreigners who don’t reside in Spain? How about third-country nationals who live in another EU country? What about EU nationals who don’t live in the EU?
Now we know exactly who would have to pay this tax.
The ruling Socialists’ proposal reads: “The State Complementary Tax on the Transfer of Real Estate to Non-Residents of the European Union is created.”
“This indirect tax will be levied on the onerous transfer of real estate located in Spanish territory and the creation and transfer of property rights in such assets to individuals and entities not resident in the European Union.”
Excerpt from the Socialists’ proposal stating which property buyers are subject to the 100 percent tax.
Therefore, EU residency is the deciding factor rather than EU citizenship.
As an example, a UK national who is a resident in Germany would be able to avoid the proposed 100 percent tax, but a German national who lives in the UK would have to pay it.
In this sense, even Spanish nationals who don’t live in the EU would have to pay the levy if they wanted to buy a home in their own home country.
American and British nationals who live in Spain or any other EU nation would be exempt from paying the 100 percent tax, but if they live in either the US or the UK they would have to cough up double the amount to buy a second home in Spain.
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