Draft bill to double property prices for non-EU buyers

idealista

13 June 2025, 13:30

I want to keep this article short and simple, leaving aside esoterics.

Last week, the Spanish government submitted to Parliament a proposal for a draft bill of a 100% tax on non-EU buyers.

I will gloss over the draft bill to clarify its main points.

It should be noted that this draft bill introduces a slew of other major property-related tax changes (such as a widespread VAT of 21% on tourist accommodations) I will not get into.

The main idea I want to convey today is that this is only a draft bill, subject to change. Meaning it may, or may not, be approved by Congress. And, even if approved, it could be tweaked, being significantly toned down.

As already published in multiple articles, this draft bill has more to do with domestic politics (appeasing a disenfranchised electorate base and grabbing headlines) than providing meaningful solutions to a growing problem, which is the unbridled rise in house prices in Spain (caused by the Spanish government’s continued market intervention with its misguided housing policies).

Challenges to the new proposed law from a legal point of view

I do not fancy extending myself going down a rabbit hole on why this new law is not fit for purpose from a technical point of view. I will list in bullet points what I think are the main reasons. This draft bill faces both domestic and European challenges.

Notwithstanding the above, the law will be enacted (it would take over 6 months). Once approved, it would be challenged and likely repealed. But the damage would be done, both domestically and abroad, tarnishing Spain’s reputation.

1. National law

Property Transfer Tax (ITPAJD) is a devolved tax competency to Spain’s autonomous regions. The government has no business in duplicating a tax which already exists and is legally earmarked for said regions.
It is a generally accepted principle that pervades all Spanish law that taxes cannot be confiscatory (Article 31.1 of the Spanish Constitution). A tax which levies a 100% tax rate is punitive and blatantly confiscatory.

2.European law

One of the basic principles that undergirds the Union is the free circulation of capital (Art. 63 TFEU). This must be understood in broad terms, not only between EU member countries, but also between the Union and third countries outside the Union. Imposing a 100% tax on non-EU buyers is a restriction on the free movement of capital, which undermines the Union as a whole.
European Law sanctions fiscal discrimination. Again, this must be understood broadly, not only between EU member countries, but also between the Union and third countries outside the Union. Member countries are not at liberty to pass laws that discriminate against foreigners. As an example of this, the landmark ECJ ruling on inheritance tax, from the 3^rd of September 2014, which Spain lost on grounds of fiscal discrimination against foreigners.

Draft bills' main points

For ease of comprehension, I list in bullet points the main points:

This is a new national tax and will apply in all of Spain (except the Basque Country and Navarre).
It only affects resale property. New build properties (off-plan) would be exempt from this tax (as a different set of taxes applies to them).
Taxpayers targeted are non-resident, non-EU property buyers.
The tax levies a 100% tax rate. Meaning property prices will be DOUBLED.
Regional transfer tax is deducted from the national tax to pay (as in effect it is the same tax the government is proposing to duplicate).

Example of the new tax for the region of Andalusia

In Andalusia, we have a flat tax rate of 7% transfer tax on resale properties.

Let's imagine Archibald, a non-resident British national, who wants to buy a €500,000 resale property to retire.

Buyer pays €35,000 to the Junta de Andalucia (7% transfer tax).
Under this new law, he would also need to pay the Agencia Tributaria (Spain’s Tax Office) an extra €465,000 in transfer tax.

Overall, Archibald stands to pay a total of €500,000 in transfer tax (to both Andalusia and the central government) plus the €500,000 asking price.

The proposed tax change means Archibald pays DOUBLE the asking price, that is €1,000,000!

Proposed ways to circumvent Spain’s new 100% transfer tax

Buy new build property instead of resale.
Attain Spanish residency before you buy resale property. Initial residency is fine, no need for permanent or long-term residency to benefit.
Incorporate a Spanish holding company to acquire property (or buy an off-the-shelf company). As a Spanish company is resident, it allows you to override the new tax law.
Buy resale property before the new law comes into force. It will take a minimum of 6 months before this law is approved, likely by early 2026.

In conclusion

Let’s take a deep dive into why this new smokescreen law solves nothing and adds new problems.

Non-EU buyers accounted for 3% of all property sales in Spain during 2023 following the official figures of the Notaries Association (which includes both new builds and resales). Even if this tax is passed into law, it will barely dent house prices in Spain. Moreover, as half of the properties that were bought were new builds - which are not affected by the new tax law - the impact is likely under 1.5% of all property sales. Hardly a drop in the ocean.

There is also the argument that foreigners, and in particular non-EU buyers, acquire property mainly on the Spanish coasts and islands, looking for sun-soaked beaches. Hardly any foreigners buy in Spanish major cities (such as Barcelona, Madrid, Malaga and Valencia) where the crux of the housing price problem is located. So, there is no demand overlap.

Another valid argument is that the type of properties, and especially the price range, that foreigners are interested in do not match those that natives usually go for. In other words, foreigners and Spaniards do not compete for the same type of properties, as the latter are normally priced out. Again, there is no demand overlap.

This law, as we say in Spanish, is a “brindis al sol” or a toast to the sun. In other words, its impact on soaring house prices will be negligible, nada. Surely the government already knows this. It’s just a politically calculated headline-catching law to garner more votes on polling day, nothing more. All artifice, no substance.

However, it will adversely impact the thousands of businesses and jobs that dot the Spanish coastlines and are heavily reliant on foreigners and tourism to make a living.

Almost one-fifth of Spain’s GDP is from tourism (12% directly and a further 6% indirectly). Tourism is the goose that lays golden eggs. And guess who is the largest contingent of tourists? Yes, British. Also, guess who is the largest contingent of foreign property buyers? Yes, British again, by a long shot. Is it wise to poke the eyes of people who are actively contributing towards bringing wealth into Spain and are helping create well-paid jobs for locals? These are not property speculators, they are looking to retire and enjoy in their twilight years the life and mild weather Spain is renowned for. What’s wrong with that?

Let us not blame foreigners for this administration's own failings and shortcomings in the housing agenda. Misguided housing policies, over taxation, and unrelenting ideologically driven market interventionism are to blame for soaring house (and rental) prices in Spain, not foreigners. Get a grip.

Politicians should not play dice with a country’s best interests for the sake of a short-term political gain. This is what defines self-serving career politicians, who take decisions on the hoof based on short-term polls, as opposed to real statesmen, who are selfless and devise grand long-term strategies that benefit a country as a whole. Guess who history remembers.

Is Spain shooting itself in the foot by approving a tax law that solves nothing and makes matters worse for us all? Will this be yet another self-inflicted wound? I leave it to the reader to decide.

“Politics: the art of creating new problems where none existed.”

At LNA, our friendly team can assist you in buying (or selling) your property anywhere in Spain. We can also get you any visa in Spain. Give us a call.

At Larrain Nesbitt Abogados (LNA) we have over 22 years of experience specialising in property conveyance and taxation all over Spain. 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.

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.