The proposed tax on non-European homebuyers in Spain could reshape the real estate market and particularly affect foreign investors. This tax aims to facilitate access to housing for Spanish residents. However, it has sparked intense debate regarding its constitutionality and its potential impact on foreign investment.
Would it facilitate access to housing or scare away investment?
The measure aims to curb home purchases by non-EU citizens. The big question is whether this new tax would actually increase the supply of properties available to residents or, on the contrary, lead to a drop in international investment in Spain.
What is the tax for non-European home buyers in Spain?
This state tax would apply to the purchase of real estate in Spain by non-residents of the European Union. It would also affect the creation or transfer of real rights over these properties.
Which properties does it affect?
The tax would focus on second-hand homes. Purchases of new-build properties from developers, transactions subject to VAT, and certain business-to-business or professional transactions would be excluded.
Technical details of the new tax
Taxable base: How is it calculated?
The taxable base would be calculated using the cadastral reference value of the property. If the declared purchase price is higher than this value, the higher amount would be used.
Limited deductions
Only charges that actually reduce the property's value can be deducted. Debts, even those secured by a mortgage, are not deductible.
100% tax rate
The tax would be applied to 100% of the taxable base, although it would be possible to deduct the Property Transfer Tax (ITP) paid in the autonomous community where the property is located.
Practical example: How would this tax affect us?
Let's say a Canadian citizen buys an apartment in Valencia for €600,000, and this price exceeds the reference cadastral value. According to the proposal, the buyer would have to pay an additional tax of €600,000.
This amount would be reduced by the Property Transfer Tax (ITP), which in the Valencian Community would be approximately €60,000. The total tax cost would be €540,000 for this new tax alone.
In contrast, a buyer residing in Spain or the European Union would only pay the €60,000 transfer tax. This difference raises the possibility of discrimination between residents and non-residents.
Are we facing a confiscatory and discriminatory tax?
The proposal raises two important legal issues:
Is it a confiscatory tax?
A tax rate of 100% could be considered confiscatory, which would violate the Spanish Constitution.
Does it violate the free movement of capital?
The tax could contradict Article 63 of the Treaty on the Functioning of the European Union, which guarantees the free movement of capital, even with non-EU countries.
Legal precedents that forced Spain to rectify
Inheritance and Gift Tax
In 2014, the Court of Justice of the EU ordered Spain to eliminate tax differences between residents and non-residents. Finally, the Anti-Fraud Law 11/2021 extended the tax breaks to all buyers, including non-EU citizens.
Solidarity Tax on Large Fortunes
In 2022, this tax did not allow non-residents to claim the €700,000 exemption. The law was subsequently amended retroactively to correct this discrimination.
An uncertain future for the tax on non-European buyers
Given this background, it is likely that the new tax on non-European buyers will be reviewed by European authorities. It could be deemed illegal and require modification or elimination, as has happened before.
Resitax: experts in real estate taxation in Mallorca
At Resitax, we help real estate buyers, sellers, and investors make informed decisions. We are experts in real estate taxation and assist both residents and non-residents with their transactions.
If you are thinking of buying or selling a property in the Balearic Islands, especially in Mallorca, it is essential to have professional advice to help you optimize the tax burden and comply with current regulations.
In our real estate law section in Mallorca, we explain how we can help you with the purchase, sale, and management of properties on the island, always with the support of our team of tax experts.
At Resitax we offer you:
- Tax advice for non-resident buyers.
- Detailed analysis of the tax burden in each transaction.
- Legal support throughout the entire buying or selling process.
- Constant updates on tax and legislative changes affecting the real estate market in Mallorca.
We closely monitor all tax developments to protect your interests and help you make safe investments in Spain.