Brits looking to buy a property in Spain could be hit with taxes equivalent to the full price of the house under new reforms. The Spanish Prime Minister is planning to curb the number of homes sold to foreigners by significantly hiking up their tax bills.
Under the proposed changes, non-EU citizens without legal residence in Spain will be required to pay taxes worth 100% of the property’s value. Official figures show that the number of Brits registered as living in Spain rose from 276,089 in 2017 to 284,037 in 2023.
In 2023, there were 12,470 Spanish property sales involving a British buyer, a decrease of 16.5% compared to the previous year. Pedro Sánchez, the Spanish Prime Minister, unveiled the proposal in Madrid on Monday, stating: “The tax rate that non-Europeans who do not reside in our country must pay when buying a home in Spain will be increased to 100 per cent, prioritising that the available homes are for residents.”
One in five homes sold in Spain is purchased by foreigners, many of whom are non-residents. “We are going to limit the purchase of houses by non-resident non-EU foreigners. Non-residents bought 27,000 houses last year, mainly for speculation,” added Sánchez. The proposal will now go to parliament, where Sánchez’s minority government often struggles to pass legislation.
This announcement comes amid growing concerns over rising house prices, particularly in Madrid. To address rental concerns, Sánchez has announced plans to endorse state-guaranteed leases and assign thousands of government properties through a new housing body. Additionally, he’s set to increase taxes on holiday lets so they contribute “like a business”.
“It isn’t fair that those who have three, four or five apartments as short-term rentals pay less tax than hotels or workers,” Sánchez emphasised. His approach aligns with a fresh EU policy demanding VAT imposition for online marketplaces; presently, Spanish hostels benefit from a lower 10% VAT tariff, integrated into the legislation.
The shift comes amidst growing worries over how surging rents are fuelling urban gentrification, prompting landlords to choose more profitable short-stay tourist lodgings, particularly in city and coastal spots. Recently, probes started scrutinising Airbnb for not expunging numerous deceptive listings from its website.
In a significant move to mitigate this issue, property owners in areas with steep rents will receive a full tax exemption for their income, provided it matches the government’s rental index. Fostering social housing development is also on the agenda, alongside granting roughly 500 acres of residential land to the newly formed state housing agency.
Yet, these proposals by the Socialist Party face critique from the right for excessive regulation and from the left flank for alleged leniency towards proprietors. The national bank previously pointed out the need for rental market intervention, noting an imbalance in household disposable income dedicated to rent.
Struggling to pay the rent — which is among the highest in the EU — could lead to “adverse economic and social effects”.