Tax on the purchase of real estate in Spain in 2025

Spain has never been indifferent to changes in tax regulations, but what Spanish Prime Minister Pedro Sanchez has announced may indeed cause considerable turmoil in the Spanish property market. A controversial tax of up to 100% of the value of property purchased by non-EU nationals who do not have resident status is to be introduced. Sounds absurd? Perhaps at first glance, but the Spanish government has its explanations for this.

Why is there such a property tax in Spain?

The property market in Spain has been suffering from excessive activity by foreign investors for years. In 2023 alone, non-EU citizens purchased around 27,000 properties. And although many of these purchases were made for investment purposes, the impact on local residents is enormous – prices of Spanish properties in attractive locations are skyrocketing, and the average Spaniard is increasingly having to give up their dreams of owning their own home. The Spanish government has therefore declared: “Enough is enough!” But isn’t this solution too radical?

Who will be affected by the new tax regulations in Spain?

The tax proposal is primarily intended to affect citizens of the United Kingdom (due to Brexit) as well as the United States, Canada and other countries outside the European Union. Of course, if the regulations come into force, buyers from any country outside the EU will have to reckon with a huge additional cost when purchasing property in Spain. Does this sound like a precursor to a decline in the number of transactions? Quite possibly. Experts are already warning that this could hamper the development of the construction sector, which is an important part of the Spanish economy.

Tax and more – other government proposals

The new property tax for non-residents is just the tip of the iceberg. The plan also includes other measures to tackle the housing crisis. Here are some of them:

• Tax incentives for local owners: If you want to sell your flat at a reduced price, you can count on a tax relief.
• Short-term rental regulations: Owners of properties intended for tourist rental will pay higher tax rates, especially if they own several flats of this type.
• Public property management: This involves the creation of a state property management body to increase availability and counteract speculation.

Each of these proposals evokes its own set of emotions, ranging from approval to harsh criticism. Regardless of opinion, one thing is certain – the Spanish parliament is in for a heated debate.

Is this even legal?

Not everything that sounds good in theory works in practice. Critics of the new regulations point to potential legal problems. Firstly, the Spanish constitution and EU rules require fair taxation. Wouldn’t imposing a 100% property tax on one group of people be discriminatory? Secondly, the Spanish government does not currently have a parliamentary majority, which could make it difficult to introduce such regulations. Finally, some regions governed by the opposition may openly oppose the new regulations.

Existing taxes for non-residents – what is already in force?

Even without the new regulations, non-resident buyers of property in Spain must reckon with additional costs. Here are the current charges:

• Property tax (IBI): This is a municipal tax on the cadastral value of the property and applies to all owners, regardless of their residency status.
• Property income tax (IRNR): If you rent out your property, you must pay 24% (for non-EU citizens) or 19% (for EU/EEA citizens) on your rental income.
• Wealth tax (IP): Applies to properties exceeding €700,000 in value and is settled at the end of the tax year.
• Capital gains tax (“Plusvalía”): Applies to the sale of a property and is usually paid by the seller.

 

Legal and practical workarounds for the new 2025 regulations.

Even if the regulations come into force, there are ways to “circumvent” them. How? Simply obtain resident status, for example through a Non-Lucrative Visa or the recently popular Digital Nomad Visa. These programmes allow foreigners to live legally in Spain, which automatically exempts them from the new tax. Sounds clever? Perhaps, but this legal loophole is likely to become a popular solution.

What next?

Although Prime Minister Pedro Sánchez’s proposals are bold, many unknowns remain. Will they be successful? Will they actually improve the situation of local citizens? Or will they discourage investors and cause Spain to lose out economically? One thing is certain – 2025 may bring significant changes for anyone interested in buying property in Spain. That is why it is worth keeping your finger on the pulse… because who knows what else they have up their sleeve?