Unpacking Spain’s Proposed Property Tax on Non-EU Buyers

February 8, 2025

By David Bornstein

Spain has spent years welcoming foreigners and attracting foreign investment. Nevertheless, recent headlines have sparked confusion and debate over a proposal from Spain’s government to impose a 100% tax on property purchases by non-EU foreign buyers. As presented, it sounded like this would mean that non-residents purchasing property in Spain could pay up to the equivalent of the entire property value in tax! But what does this really mean, and how would it impact the market? I previously addressed this topic in an earlier post, but there has been so much discussion in social media circles since that I want to spend a few more paragraphs unpacking the discussion here.

What Is Being Proposed?

The Spanish government has suggested a tax of up to 100% on the purchase price of real estate by non-EU, non-resident buyers. While details are still unclear, the proposal is aimed specifically at appeasing those who are concerned about increasing real estate speculation and how to ease housing affordability for local residents.

It’s important to set the record straight—this is what Prime Minister Pedro Sánchez actually said in Spanish. Some interpretations, probably out of sheer disbelief and particularly in English-speaking social media circles, have distorted the statement, suggesting variations in the translation, insisting that what the PM proposed was doubling the transfer tax, disallowing certain exclusions, or other modifications. None of these interpretations reflect what was actually proposed. Sánchez explicitly stated that the new tax would be up to 100% of the property’s value, not a mere adjustment to existing taxes. But is this something that U.S. homebuyers really need to be concerned about?

Who Would This Really Affect?

While the proposed tax is framed as a measure against speculative buyers, it was not made clear who exactly would be affected. First off, any such changes will have to be debated and approved in Parliament, a very difficult road to say the least. But moreover, it is very possible that any such change may simply give regional governments the liberty to enact additional local taxes but only in areas where the housing shortage is the worst, such as major city centers, and perhaps only for true speculative investors wishing to own multiple investment properties, certainly not for those looking at long-term residence but maybe not even for residential tourists – those who buy properties as second homes. The leadership in Spain is very much aware that many non-resident buyers in Spain are not investors looking to flip properties per se but rather individuals or families looking for a vacation home, retirement residence, or a place to spend part of the year. Furthermore, regions such as Andalucia are very actively involved in promoting such types of investment and such a policy goes completely counter to the real estate driven economy on the Costa del Sol.

Luxury buyers contribute significantly to the Spanish economy. Their presence supports construction, maintenance services, tourism, and local businesses. If they are discouraged from buying, there could be ripple effects on employment and investment in high-end property developments.

Would This Make Housing More Affordable for Spaniards?

One of the main arguments for this policy is that it will make housing more accessible to Spanish residents. However, the majority of non-resident buyers in Spain are purchasing luxury properties—high-end villas, beachfront penthouses, and homes in exclusive developments. These properties are not in competition with the housing stock that the average Spanish buyer is looking for. A €5 million villa in Marbella or a €2 million penthouse in Málaga is not the same as a €250,000 home in a residential neighborhood. Even if foreign buyers left the market entirely, it wouldn’t suddenly make these properties affordable to middle-class Spaniards.

If the goal is to lower housing prices for residents, the solution would need to address other factors:

• The supply of affordable housing
• Mortgage accessibility for locals
• Regulation of short-term rentals
• Economic policies that impact wages relative to housing costs

Alternative Measures Being Discussed

While the proposed tax on non-EU buyers is one approach, other potential solutions have been discussed to address housing concerns. These include lowering the Property Transfer Tax (ITP) for younger buyers acquiring their first home and reducing VAT on new housing purchases from 10% to 4%. The idea behind these measures is to encourage homeownership among residents rather than penalizing foreign buyers. Some proposals also suggest increasing the supply of housing as a way to stabilize prices, rather than imposing additional taxes.

What Happens Next?

At this stage, the tax remains a proposal, and it is unlikely to move forward in its current form. Given that real estate taxes are typically handled at the regional level in Spain, enforcing such a national tax would certainly face legal and logistical challenges. Additionally, it is unclear how it would interact with Spain’s existing transfer tax (ITP), stamp duty (AJD) and VAT structures, which already differ between new and resale properties.

What Should Buyers Do?

For now, it is important to understand that nothing has changed. The best course of action for potential buyers is to stay informed and follow the developments closely. If you’re considering purchasing property in Spain, working with a professional who understands the evolving legal landscape can help you navigate any potential changes. In the short-term ahead, there are no changes, and buyers today will not be affected.

Spain has long been a sought-after destination for international buyers, and while policies may evolve, its appeal as one of the world’s best places to live, invest, and enjoy is strong and will likely remain so well into the future.