
On Monday the 13th of January, Spain’s president proposed to levy a tax of 100% tax on home purchases by non-EU nationals (e.g. American and British citizens). This controversial announcement warrants a closer examination of its political motives, practical implications, negative effects and legal feasibility.
- The political reasons behind this tax announcement
- The real reasons behind Spain’s rising rental and housing prices
- Negligible impact on the property market
- Negative effects of the proposed 100% tax on non-EUs
- Domestic challenges: difficult and lengthy implementation
- EU legal and technical constraints
- The principle of primacy of EU law
- A practical solution to circumvent the 100% tax
- Conclusion: much ado about nothing
The political reasons behind this tax announcement
To fully understand the motives underlying this proposal, we must place it within the broader context of Spain’s politics. The acting president, and his administration, are embroiled in high-profile court cases. The ongoing turmoil has left the government politically weakened, leading to legislative stagnation over the past year.
Facing these domestic challenges, the president is reportedly considering advancing the general election to early summer in a bid to consolidate his political support. The 100% tax proposal should be viewed through the lens of electoral strategy. It is a politically motivated announcement aimed at appeasing his disgruntled domestic audience rather than a serious policy initiative.
In Spanish politics, such proclamations often serve as “political bravado” rather than actionable measures. On Sunday 19th of January, in a political rally in Extremadura, Mr. Sanchez claimed he wanted to “outright ban home purchases by non-resident buyers from outside the EU” on the grounds “they are all property speculators.”
Spain’s president has irresponsibly shifted all the blame on the unbridled rise of housing and rental prices on property speculation fuelled by non-resident non-EU nationals. The latter have been publicly signalled out by the president as being singlehandedly responsible for Spain’s rising housing and rental prices (!). In plain English, they are being used as scapegoats. The president is following a tactic of denial and deflecting the blame on foreigners (who do not get to vote on Spanish politics, so no loss of votes).
This is a ludicrous statement and I will explain below why it is unfounded and untrue.
I will also care to explain the negligible effect the proposed tax rise will have on rising house prices but it will however have a severe impact on local businesses and employment if it comes to fruition.
The real reasons behind Spain’s rising rental and housing prices
Simplifying the main reasons are:
1. Rental prices.
As highlighted in multiple articles in the past, the misguided government’s housing policy and rental legislative initiatives, which are ideologically driven, have greatly backfired, driving rental prices sharply up.
In effect, they have fuelled and exacerbated the unabated rise of rental prices in Spain (as landlords have massively pulled out of the property market, afraid of these new rental measures which go out of their way to protect tenants at the expense of landlords). Following the laws of demand and supply, these counterproductive laws passed by the Spanish government led to higher rental prices as fewer units were on offer. Although the Spanish government pursued what I consider lofty goals (to assist vulnerable collectives to gain access to housing) it did so by steamrolling the rights of landlords. In effect, Spain adopted social housing policies at the expense of private owner’s rights. It is a basic rule in negotiation that both parties concede points so as to reach a middle ground. When one party asserts its power over the other no consensus is reached and an imbalance in the property market is created which in this case translates into landlords and owners pulling out of the rental market driving rental prices sharply upwards creating a vicious spiral that feeds upon itself perpetuating and exacerbating the problem as fewer and fewer properties are made available to rent, driving prices up.
2. Housing prices
There are several factors which explain this, some domestic others exogenous.
Post-Covid-19, the world faced a supply chain disruption in several fronts. This resulted in long delays and increased costs. As a result, the building materials employed in new build property skyrocketed greatly impacting the price commanded by property developers and realtors. This led to significant parts of the population being priced out of the market over the past years.
In addition, Spain amended planning laws forcing developers to allocate 40% of their plots to social housing. Not even giving them the freedom to concentrate all the social housing within one space to avoid the remainder of the units being affected. As a result, Spain is now building 60% less houses than a decade ago which again, following the laws of demand and supply, impacts on house prices driving them sharply up.
Negligible impact on the property market
Despite its provocative nature, the proposed policy would have minimal impact on Spain’s overall property market. Of the approximately 587,000 annual property transactions in Spain during 2023, only 18,648 involved non-EU nationals. In other words, non-EU buyers accounted for 3% of the overall 2023 property sales following the official statistics supplied by the Notaries Association of Spain. Give me a break, hardly a drop in a wide ocean.
Even if enacted, this tax would scarcely dent rising house prices or the broader real estate landscape. In short, the policy lacks practical significance and serves more as a grandiose rhetorical gesture than a meaningful solution to rising housing and rental prices in Spain, which is indeed a concerning matter.
Negative effects of the proposed 100% tax on non-EUs
Foreigners, and in particular non-resident non-EU nationals, tend to concentrate in Spain’s beautiful coastal areas, Balearic and Canary Islands. These foreigners do not normally buy property in large Spanish cities such as Madrid, Barcelona, Valencia and Malaga with the notable exception of South American immigrants because of their cultural and linguistic affinity.
As a result of where these foreigners like to settle down, thousands of businesses (ranging from schools to real estate agencies to supermarkets etc) will now find themselves in financial jeopardy after this announcement. All these people, all these companies are heavily reliant on non-EU’s to conduct business. The lion’s share, with a great difference, are British nationals who would be gravely affected by the new tax proposal.
Moreover, foreigners who are heavily dependent on other foreigners to sell their properties (as their price range is well out of the reach by Spanish nationals) could be forced to a sharp drop in house prices as their pool of prospective buyers would dry out overnight, at least until the dust settles.
All these companies that dot Spain’s coastlines, and heavily rely on non-EUs, would face the hardship of this foolish decision struggling to make ends meet. Thousands of jobs would be at stake.
Domestic challenges: difficult and lengthy implementation
Spain is divided administratively into 17 autonomous regions which have devolved competencies on tax matters (with limitations). Each of these regions has their own regional parliaments to enact laws. It would take a very long time, even years, in some regions to coordinate and enact such laws.
Moreover, as stated, as regions hold tax competencies, some regions, politically opposed to Spain’s ruling party, may reject if not outright challenge the proposed 100% tax on non-EU buyers which would judicially bog down its implementation for countless years.
In short, it would be a protracted and time-consuming procedure which may even take years to implement.
EU legal and technical constraints
More critically, the proposal faces severe legal barriers. As a member of the European Union, Spain is bound by core tenets that include the free movement of goods, services, and capital. These principles, enshrined in foundational treaties such as the Treaty of Rome (1957), prohibit Member States from enacting policies that restrict investment, including from non-EU countries.
These guiding EU principles undergird the Union and cannot be undermined by any of its members, including Spain. In plain English, Member countries cannot enact laws which impede in any way, shape or manner investments, even if they are of non-EU origin i.e. British or American.
The principle of primacy of EU law
The supremacy of EU law over national legislation is a well-established principle. When conflicts arise between EU and national laws, the former prevails. National laws that clash against EU laws may be challenged and EU law will prevail.
For instance, the Spanish government previously attempted to restrict lenient tax breaks on inheritance passed by regional authorities so they only benefitted Spanish nationals. This policy was challenged in Brussels on grounds of discrimination against fellow EU citizens and was ultimately overturned by the European Court of Justice (ECJ) in a landmark ruling on the 3rd of September 2014. The ECJ’s decision forced Spain to backpedal its fiscal policy and extend the tax benefits not only to all EU nationals but also to all non-EU nationals. This quaint example proves the limitations of adopting unilateral national policies that blatantly disregard, or even clash, with the Union's interests as a whole.
As US President Abraham Lincoln aptly said: “A house divided against itself cannot stand.” The Union is a supranational construct that aims to unify European countries within a single political and economic block (mirroring the successful US model) to avoid wars that have historically ravaged the European continent. On joining the Union, Spain ceded sovereignty on certain matters which affect the Union as a whole. Spain is not at liberty to adopt rash policies, such as applying a 100% tax rate on non-EU nationals as this would have a broader impact on the Union, even affecting its foreign policy.
Even if Spain were to ignore all the obstacles I have meticulously laid out above and decided to foolishly plough ahead and implement a 100% tax on non-EU property purchases, it would almost certainly face legal challenges at the EU level. The European Court of Justice, which routinely overrules Spain’s Supreme Court, would likely nullify such a measure for violating core EU principles. Moreover, Spain’s membership in the EU entails a mutual commitment to adhere to shared laws and regulations. Unilateral actions that contravene these agreements are neither feasible nor enforceable.
The bottom line is that when you are a Member State of the Union, it is a two-way street; you don’t get to do what you want unchecked.
A practical solution to circumvent the 100% tax
The Spanish president affirmed his government will ban property sales, or enact a 100% tax, on all non-resident non-EU buyers.
Surprisingly, circumventing this restriction couldn’t be easier.
All you need to do is apply and attain Spanish residency. Our law firm has assisted over 1,000 non-EU visa holders and their families over the last decade.
Idealista kindly published one of our detailed articles on how to attain Spanish residency: Moving to Spain in 2025? Spanish visa overview.
Once you have secured Spanish residency you are off the hook! No more 100% tax.
Couldn’t be easier.
Conclusion: much ado about nothing
The proposed 100% tax on non-EU property purchases is a prime example of political posturing.
While it may generate sensational headlines and temporarily deter investment, it is unlikely to materialise due to its negligible market impact and clear legal incompatibilities, both at a national and EU level. For Spain, as an EU member, such policies are not only impractical but also legally untenable.
Ultimately, this announcement should be seen for what it is; an electoral tactic designed to capture domestic attention rather than a genuine policy initiative. Investors and stakeholders can rest assured that this proposal is unlikely to come to pass. There is no need to lose sleep over it.
Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. Ní neart go cur le chéile. VOV.
At Larrain Nesbitt Abogados (LNA) we have over 22 years of experience specializing in taxation, and property conveyance. We also assist clients with immigration & residency visas and inheritance procedures (probate). You can contact us by e-mail at info@larrainnesbitt.com, by telephone on our UK line (+44) 0754 3838 218 or Spanish line (+34) 952 19 22 88, or by completing our contact form.
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