Insights from a legally advised perspective.
Prime Minister’s Remarks and Clarification on Proposed Taxation Changes
On January 13th 2025, the Prime Minister made statements that left room for varying interpretations, particularly when compared to the official plan later published.
My phone and many other agents´ phones went crazy with concerned buyers, and vendors.
Having spoken with several lawyers and collegues one conclusion is that the press should be held accountable for the poor reporting of this news, and so I felt I should reach out to you.
Public Statement Analysis
During the press conference, he declared:
"We have decided to restrict real estate purchases by non-EU foreign nationals who do not hold residency. To achieve this, we will impose an increased tax on such transactions, potentially reaching 100% of the property’s value."
The press, particularly the UK press went to town with gory headlines and usual sensationalist stories causing distress to not only those who have invested in the country but those who plan to. And of course, those of us in the industry who rely on it. From Estate Agents and lawyers to the hospitality and building industry.
At first glance, this statement appears to indicate that the government intends to levy a tax equivalent to the full purchase price of a property.
For example, a non-resident buyer from outside the European Union acquiring a home for €250,000 would, theoretically, be required to pay an additional €250,000 in taxes. This is the interpretation that has been widely circulated in media reports; however, upon closer examination, this assumption appears to be incorrect for several key reasons.
Official Government Documentation
The official government document, which outlines the actual proposal, presents a slightly different wording than what was conveyed in the Prime Minister’s public remarks. The document states:
"The tax burden on European nationals who are not residents of our country when purchasing property in Spain will be increased by up to 100%."
This phrasing suggests a different interpretation than what was initially inferred from the press conference. Rather than imposing a tax equal to the entire property price, the government may instead intend to increase existing property-related taxes. This could mean doubling the Property Transfer Tax (from 7% to 14%) or VAT (from 10% to 20%), rather than introducing an entirely new levy equivalent to the full purchase amount.
Likelihood of Implementation
At this stage, it is crucial to recognise that the Prime Minister’s proposal remains theoretical and faces significant challenges before becoming law.
Property Transfer Tax is managed at a regional level in our case Andalucia, and most Spanish regions are controlled by opposition parties that are firmly against the proposed increase.
The current government does not hold a parliamentary majority necessary to enact such a measure. In fact, Andalucia is held by the PP, the opposition party which has made several of its own & more sensible announcements about the housing crisis one of which is below.
“The presidents of the autonomous communities governed by the PP agree on a tax reduction for buying, renting, or leasing a home, especially for the groups that suffer the most from the crisis and where the Transfer Tax for young people will be reduced to 4% and public guarantees for mortgages will be extended up to the age of 40.
The housing pact includes making public land available to the sector so that rental housing can be built at fixed prices, with a rental price up to 30% cheaper than the free market average.
Solutions to help the youngest, solutions to multiply the offer, so that owners no longer have reservations about renting out their homes, solutions for the sector, and solutions so that having a home is an accessible asset for everyone,”
No details have been provided on how Pedro Sanchez´s policy might impact corporate purchases, particularly acquisitions through Spanish or EU-based limited liability companies (SLs). It remains uncertain whether such entities would be subjected to the same taxation adjustments.
Given these obstacles, it is highly unlikely that this policy will be implemented in the near future if at all.
The proposal currently appears to be speculative rather than imminent, and for the foreseeable future, Spain’s property tax system remains unchanged, regardless of the buyer’s nationality.
