100% tax on property purchases by non-EU buyers

Pedro Sánchez, Spain’s Prime Minister, has announced a controversial plan to impose a 100% tax on non-EU residents purchasing property in Spain. It’s one of his 12 proposals to tackle the worsening property crisis which is driving rent and purchase prices up, leaving many Spaniards unable to get on the property ladder.

Other proposals in his 12-step plan include refurbishing empty houses to make them available at affordable prices, tighter regulation when it comes to fraud in seasonal rentals and reducing tourist licences for renting out properties short term.

His plan to implement a 100% tax on property purchases for non-EU buyers has been met with criticism from many living in the country.

So what exactly does this proposed tax mean and who is it going to impact? Here’s what you need to know about buying property in Spain.

The Housing Crisis in Spain and Restrictions for Foreign Investors
Over the past few years, there have been several protests happening in cities all over Spain in response to housing prices. The Spanish property market has seen property prices almost double over the past decade, a statistic which well outpaces income growth. Younger Spaniards are unable to buy property, let alone rent, partly because house prices have been driven up by the demand from wealthier foreigners. In Madrid and Barcelona alone, rent prices soared by as much as 33% in the last five years.

When addressing the problem, Pedro Sánchez said “The West faces a decisive challenge: To not become a society divided into two classes, the rich landlords and the poor tenants”.

The move came about in an attempt to prioritise residents and Spanish citizens when it comes to selling property and not allow non-EU citizens to buy second homes in the country.

This announcement also coincides with Spain’s decision to close the Investor Visa Program or Golden Visa as it’s also known. Previously, non-EU investors could receive residency if they purchased real estate worth over €500,000 but, from April 3rd 2025, this will no longer be the case.

The change in this visa program and the proposal for a 100% tax system could make buying property in Spain extremely expensive for non-EU residents.

Who Exactly Does the New Tax Proposal Affect?

The proposed tax charge will affect non-EU resident property buyers, including those from the UK. After Brexit, buying property in Spain has become more difficult, but this new tax law will have a much greater impact on Brits looking to buy in the country.

A non-resident is anyone who visits the country for less than 183 days a year and a resident is someone who can legally stay in the country for longer than that. Sánchez has isolated non-EU residents, believing that they are often the ones who buy second homes in the country and either leave them empty for large parts of the year or benefit from them financially. Both of these can negatively impact Spain’s property crisis, exacerbating the lack of supply for those wanting to buy or rent.

How Many Foreigners Are Buying Property in Spain?
In 2023, according to the Spanish Property Registry, 15% of property sold in Spain was to foreigners, including EU nationals. That’s 87,000 out of 583,000 sales. Of these, 27,000 properties (which represents 5% of the total properties sold) were to non-EU residents – mainly from the US, UK, Morocco, Venezuela and Mexico.

The core controversy around the new tax proposal is whether 5% of total sales really is a direct threat to housing in Spain or if there’s a better way to tackle it.

Potential Implications of Such a Property Tax
Many people looking to buy property abroad may look elsewhere where there’s lower tax for non-EU residents. As of now, the amount non-EU residents pay in property tax in Spain is decided by each geographical area. In Valencia, for example, non-residents, residents and Spanish citizens pay a 10% transfer tax alike. Not many will want to pay 10 times this.

Whilst this is arguably what the Spanish government wants, others worry about the impact such a move will have on tourism in the country. Just because you’re not a resident, doesn’t mean you won’t spend months in Spain, eating out in local restaurants, supporting businesses and paying taxes (such as Non-Resident Income tax).

Furthermore, many non-EU residents are likely to buy second homes in touristy areas on the coast and not in cities, which is where the housing crisis can be felt most. Foreigners buying in cities tend to be residents who work and contribute to the country. Isolating non-EU residents, such as those from the UK who have always been big property buyers in Spain, means there’s more property for other big European buyers, such as those from Germany, France and Belgium, to buy. It doesn’t necessarily open up these properties for Spaniards.

For many in the country, the logical step is to build more houses to match the ever-growing demand.

Will Taxing Non-EU Residents Help Spain’s Housing Crisis?
It’s easy to see what Pedro Sánchez is trying to do by potentially implementing a 100% property tax for non-EU residents. There’s no denying that there’s a housing crisis in Spain and that something needs to be done to allow Spanish residents to rent and buy property in their own country.

But it’s hard to see how taxing a foreign group of people will help this, especially when they were responsible for just 5% of property sales in 2023.

As of yet, it’s unclear exactly how or when the Spanish government’s plan to tax non-EU residents will take place. This proposal, along with the other 11 he outlined this month, will be studied carefully over the next couple of months before making a final decision.

Note that this article is general and is shared as information. Property, tax, finance and other legal topics are personal and can vary not only from person to person but between the different regions of Spain. We recommend that you seek professional guidance if you need advice on matters covered in this article.

10 Feb 2025