Understanding the Implications of Spain's Proposed Property Tax Hike for British Buyers
First published 14th of January 2025
“This proposed tax increase represents a challenge for British buyers, but with careful legal guidance and planning, it is still possible to invest securely in Spain.”
— Mr Isaac Abad Garrido, Winner of the Best Lawyer Award 2025 for Tax & Conveyancing Law
⚠️ Update – 26 May 2025: Spain’s PSOE has now formally submitted the proposed 100% property tax on non-EU buyers to Parliament. The draft law is under political and legal scrutiny and has not yet been approved. Jump to full update
Spain’s Property Market: New Challenges for British Buyers
In a move that has caused widespread concern among potential property buyers, Spain’s Prime Minister, Pedro Sánchez of the PSOE party, recently announced a proposal to dramatically increase taxes on non-EU nationals purchasing property in Spain Source: El Mundo.
This proposed 100% tax hike has been widely reported in the British press, raising significant questions about its impact on British citizens looking to invest in homes in Spain.
In 2023, foreigners acquired approximately 15% of the homes sold in Spain, reaching a total of 87,340 transactions. The main non-EU nationalities buying were:
- British: 9.5% of purchases.
- Moroccans: 5.4% of purchases.
- Chinese: 2.0% of purchases.
- Russians: 1.5% of purchases.
- Ukrainians: 1.2% of purchases.
- Argentinians: 0.8% of purchases.
- Ecuadorians: 0.5% of purchases.
Infographic: Foreign Property Purchase in Spain (2024) – Click To Enlarge
As the largest group of non-resident foreign buyers, British citizens are at the centre of this debate Source: Daily Mail.
With Brexit already complicating the process of buying a home in Spain, this potential tax change introduces another layer of uncertainty. Here’s a breakdown of what this proposal entails, who will be impacted, and the steps buyers can take to protect themselves.
[26 May 2025 Update]
PSOE Formally Submits Spain’s 100% Property Tax Proposal – What British Buyers Need to Know
On 22nd May 2025, Spain’s Socialist Party (PSOE) formally presented their legislative proposal to Parliament, providing concrete details about the previously speculated property tax measures. This development transforms what was once political rhetoric into a tangible legal proposal that could significantly impact British property buyers in Spain.
The “Complementary State Tax”: Key Details Revealed
The official proposal introduces what is termed a “Complementary State Tax on the Transfer of Real Estate to Non-EU Residents” – a 100% levy on property purchases by non-resident non-EU nationals. Importantly, this would operate alongside existing regional transfer taxes, not replace them.
How the Tax Structure Would Work:
- Primary Tax: Regional Property Transfer Tax (ITP) – approximately 10-12% depending on region
- Additional Tax: New Complementary State Tax – 100% of property value
- Deduction Mechanism: The ITP paid would be deductible against the Complementary Tax
- Net Effect: Buyers would still face a substantial additional tax burden
Corrected Financial Example: The Real Impact
Let’s examine a realistic scenario for a British buyer purchasing a property in Valencia for €250,000:
Current System:
- Property price: €250,000
- ITP (10%): €25,000
- Total cost: €275,000
Under Proposed System:
- Property price: €250,000
- ITP (10%): €25,000
- Complementary Tax (100%): €250,000
- Less ITP deduction: -€25,000
- Net additional tax: €225,000
- Total cost: €500,000
This represents an 82% increase in the total cost of purchasing property, not the 100% doubling initially reported.
Expert Analysis: Why This Proposal Is Fundamentally Flawed
Mr Isaac Abad Garrido, from ABAD Abogados, highlights several critical issues with the proposed legislation:
1. Unprecedented Tax Rate Creates Legal Uncertainty
“This proposed tax is unprecedented in Spanish fiscal history,” explains Mr Abad Garrido. “No indirect tax in Spain has ever imposed a 100% rate that effectively doubles the transaction cost. This creates significant constitutional and legal challenges.”
2. Political Opposition From Coalition Partners
The PSOE government requires support from regional parties to pass this measure. However, implementing such a drastic tax would be politically suicidal given that British buyers represent the largest group of foreign property purchasers in Spain.
3. Economic Consequences for Spanish Property Owners
The tax could trigger a property price collapse in coastal areas where foreign buyers are prevalent. This would directly harm Spanish property owners and reduce government tax revenues – the opposite of the intended effect.
4. Regional Government Opposition
Autonomous communities governed by the opposition People’s Party (PP) – including Valencia, Murcia, Andalusia, and Madrid – could potentially circumvent the tax by modifying their regional Property Transfer Tax rates, as these regions control the ITP deduction mechanisms.
5. Significant Legal Loopholes
The current proposal contains substantial gaps that would allow motivated buyers to avoid the tax entirely, including:
- Establishing Spanish residency before purchase
- Creating Spanish corporate entities to hold property
- Restructuring transactions to fall under different tax categories
These loopholes would significantly reduce the tax’s revenue-generating capacity whilst creating an uneven playing field.
Constitutional Challenges: Why the Tax May Never Take Effect
Legal experts, including ABAD Abogados, believe the proposed tax faces insurmountable constitutional obstacles:
Article 31.1 Violations
- Confiscatory Nature: A 100% tax rate violates the prohibition against confiscatory taxation
- Economic Capacity: The tax ignores buyers’ ability to pay
Property Rights Infringement
- Article 33: The right to private property could be violated by making purchases economically unviable
Discrimination Concerns
- EU Treaty Compliance: Potential violation of capital movement freedoms
- Equal Treatment: Discriminatory treatment based on nationality and residency status
Strategic Implications for British Buyers
Given these developments, British buyers should consider the following strategic approaches:
Immediate Actions
- Complete pending transactions quickly before any potential enactment
- Seek professional legal advice on residency planning
- Monitor parliamentary progress through reliable legal channels
Alternative Strategies
- Spanish Residency: Obtaining fiscal residency exempts buyers from the tax
- Corporate Structures: EU-based entities may provide viable alternatives
- Timing Considerations: Regional elections could influence implementation
Does This New Law Affect Off-Plan Purchases?
Good news for buyers considering new developments: The proposed Complementary State Tax would not apply to off-plan properties purchased directly from developers.
New properties sold by building developers are subject to VAT (IVA) rather than the Property Transfer Tax (ITP). Since the proposed Complementary Tax is specifically designed to operate alongside the regional ITP system, purchases that fall under the VAT regime would be exempt from this additional taxation.
This means British buyers purchasing off-plan properties would only pay:
- Standard VAT: 10% for residential properties
- Standard fees and taxes: Legal fees, notary costs, registration fees
- No additional 100% tax burden
However, buyers should be aware that this exemption applies specifically to new properties purchased directly from licensed developers. Resale properties, even if relatively new, would still be subject to the proposed tax if enacted.
Expert Insight: “This creates a significant market distortion,” explains Mr Isaac Abad Garrido. “The law incentivises new construction purchases over resale properties, potentially affecting market dynamics and pricing structures across Spain’s coastal regions.”
Parliamentary Timeline and Likelihood of Passage
The proposal must navigate several legislative hurdles:
- Congressional debate and voting
- Senate approval (where the PSOE lacks a majority)
- Regional implementation (controlled by autonomous communities)
- Potential constitutional challenges
Political analysts suggest the proposal in its current form has a low probability of successful passage due to coalition dynamics and regional opposition.
ABAD Abogados' Recommendation
“While this proposal represents a significant political statement, its practical implementation faces numerous obstacles,” states Mr Isaac Abad Garrido.
“British buyers should remain informed but not panic. Strategic planning and professional legal guidance remain the best approaches to navigating this evolving situation.”
Next Steps for Property Buyers
- Stay informed through reliable legal sources
- Avoid hasty decisions based on initial media reports
- Consider professional advice for complex transactions
- Monitor regional responses from PP-governed autonomous communities
The situation remains fluid, and ABAD Abogados continues to monitor developments closely, providing clients with up-to-date analysis and strategic guidance throughout this uncertain period.
For expert legal guidance on Spanish property transactions and tax planning, contact ABAD Abogados today. Our experienced team provides comprehensive support for British buyers navigating Spain’s evolving property law landscape.
END OF MAY 26th 2025 UPDATE
What Is the Proposed Tax Increase?
The Spanish government is proposing to increase the tax on property purchases by non-EU residents to 100% of the property’s value Source: Perfil. In essence, buyers would be required to pay double the price of the property — the purchase price plus the tax.
For those interested in understanding Spain’s other tax obligations for residents, we recommend reading our detailed guide on the 183-day tax rule in Spain.
Example: How the Tax Could Work in Practice
Let’s say a British buyer is looking to purchase a property in Murcia for €150,000.
- Current tax rate: Approximately 10-12%, meaning the buyer would pay around €15,000 to €18,000 in taxes, and as such, a total purchase price of around €165,000 to €168,000.
- Proposed tax rate: 100% of the property’s value, meaning the buyer would pay an additional €150,000 in taxes, bringing the total cost to €300,000.
This significant increase would make property purchases prohibitively expensive for most non-EU buyers, essentially doubling the cost of buying a home in Spain.
For more details see our latest May 26th 2025 update.
Why Is Spain Introducing This Measure?
The government’s justification for this proposal is to address Spain’s ongoing housing crisis, particularly in popular tourist areas like The Canary Islands, Alicante, the Balearic Islands, and the Costa del Sol. Prime Minister Sánchez has pointed to speculative purchases by foreign buyers as a key driver of rising property prices (Source: Última Hora.).
According to Sánchez:
“Only in 2023, non-residents from outside the EU purchased 27,000 homes in Spain. Many of these purchases were not made to live in the properties but to speculate and profit from them, something we cannot allow in the current context” Source: Perfil.
However, there are significant challenges to this proposal becoming law, as highlighted by Mr Isaac Abad Garrido from ABAD Abogados:
- Political Opposition: The government requires support from Catalan, Basque, and Canary Islands parties to pass this measure. These regions have significant real estate industries and are unlikely to approve such a drastic tax hike.
- Jurisdictional Complexity: The property transfer tax (Impuesto de Transmisiones Patrimoniales) is a regional tax managed by autonomous communities. Regions like Andalusia, Murcia, and Valencia, governed by the opposition party (PP), would likely refuse to implement this measure for resale properties.
- Technical Difficulties: Imposing the tax on new properties, which are subject to VAT, could be slightly more feasible. However, gaining the necessary parliamentary majority and complying with EU regulations would be highly complex.
- Potential for Evasion: Buyers could avoid the tax by purchasing properties through corporate entities, a practice already common among high-value property acquisitions.
Why Is Spain Introducing This Measure?
An additional obstacle to this proposal is its potential unconstitutionality. Several legal principles established by the Spanish Constitution could be violated by a tax that effectively doubles the cost of property transactions, according to Mr Isaac Abad Garrido:
1. Principle of Economic Capacity (Article 31.1 of the Spanish Constitution)
The tax system must be based on the taxpayer’s ability to pay.
- Imposing a 100% tax on a property’s value would eliminate the buyer’s economic capacity to benefit from the purchase.
- This could be deemed confiscatory, which is expressly prohibited by the same article.
2. Prohibition of Confiscatory Taxes (Article 31.1 of the Spanish Constitution)
- A 100% tax would deprive buyers of all economic benefits from the transaction.
- The Constitutional Court has previously ruled that a tax is confiscatory when it imposes an excessive burden on the taxpayer’s wealth or income.
3. Right to Private Property (Article 33 of the Spanish Constitution)
The Constitution guarantees the right to private property and its social function.
- Taxing 100% of a property’s value could infringe on this right by effectively preventing individuals from purchasing property.
- Such a measure would violate the principles of proportionality and effective access to fundamental rights.
4. Principle of Equality (Articles 14 and 31.1 of the Spanish Constitution)
The tax would need to account for the personal, economic, and social circumstances of taxpayers to comply with the principle of equality.
5. Practical Effects and Reasonableness
- A 100% tax would render real estate transactions unviable.
- The Constitutional Court requires that taxes be reasonable and not hinder fundamental rights or legitimate economic activities.
In conclusion, such a tax would likely be declared unconstitutional due to its disproportionate nature and infringement on fundamental rights.
Who Is Affected by the Proposed Tax?
This tax increase specifically targets:
- Non-EU citizens who do not have residency in Spain.
- It applies to both new and resale properties.
However, current property owners will not be impacted unless they sell and look to buy again. It’s also important to note that EU citizens and Spanish residents are exempt from this proposed tax.
How Can British Buyers Protect Themselves?
Buying property in Spain can still be a wise investment, but legal guidance is now more crucial than ever. Mr Isaac Abad Garrido, from ABAD Abogados, emphasises the importance of consulting an experienced solicitor to navigate this changing legal landscape.
“Navigating Spanish property laws can be complex, especially with recent proposed changes. Having a trusted legal partner ensures you are fully informed and protected throughout the process.”
British buyers should take proactive steps to safeguard their interests:
- Seek legal advice early in the process.
- Ensure they are up to date with tax changes.
- Act swiftly if considering a purchase before the law is enacted.
Frequently Asked Questions (FAQs)
Q: Does this tax increase apply to current property owners?
A: No, the tax is only applicable to new property purchases. However, if a current owner sells their property and buys another home in Spain, they will be subject to the new tax if they are non-EU residents.
Q: Does this tax apply to residents of Spain?
A: No, the proposed tax hike only affects non-EU citizens who do not have residency in Spain. British citizens with Spanish residency would not be subject to this new tax.
Q: Are there any exemptions to the tax?
A: Yes. The tax will not apply to EU citizens or those who hold Spanish residency. Additionally, Golden Visa holders may also be exempt, but this remains unclear and we will be updating this article when further information becomes available.
Q: What happens if I’ve already started the process of buying a property?
A: If you have already signed a contract or are in the process of completing a purchase, the current tax rates will apply. However, it’s important to consult a reputable conveyancing lawyer to ensure compliance with any new regulations.
Q: Will this tax increase definitely come into effect?
A: Not yet. The proposal still needs to pass through the Spanish Parliament. However, buyers should be prepared for the possibility of the law being enacted later this year.
Q: How does this compare to other countries?
A: Spain’s proposed tax is similar to policies in Denmark and Canada, where non-resident buyers face additional taxes to limit foreign investment in the property market.
What Should British Buyers Do Now?
Our Key Recommendations:
- Stay Informed: Bookmark this page for regular updates as more details are finalised.
- Consult Legal Experts: Work with a trusted law firm like ABAD Abogados, who can guide you through the legal process.
- Act Quickly: If you are considering a property purchase, complete your transaction before the new tax law is enacted.
If you require expert guidance on real estate transactions in Spain, including buying, selling, or navigating complex legal changes, our team at ABAD Abogados is here to assist. Contact us today for personalised legal support and ensure your property investments are secure and compliant.
Conclusion: What’s Next for British Property Buyers in Spain?
The proposed tax hike is unprecedented in Spain and is a clear signal from the government that foreign speculation will be curbed. While the policy is designed to protect Spanish residents, it will undoubtedly create challenges for non-EU buyers, especially British citizens.
With legal guidance and up-to-date information, British buyers can still make informed decisions and successfully navigate this changing landscape. We will continue to update this article as more information becomes available.
About Mr Isaac Abad Garrido
Mr Isaac Abad Garrido is the Senior Partner at ABAD & ASOCIADOS Lawyers & Accountants, with over 25 years of experience specialising in Real Estate Law, Tax Law, Corporate Law, Bankruptcy Law, Business Restructuring, and Community Administration.
He has been consistently recognised among The Best Lawyers in Spain™ from 2020 to 2025 for excellence in Tax Law, and in 2022, he was named “Lawyer of the Year” in Tax Law (Murcia, Spain).
A member of the International Bar Association, he is also an Associate Partner of the Spanish Royal Academy of Jurisprudence and Law. Additionally, he serves as a Professor at the University of Murcia, teaching Tax Law, and is a regular contributor to leading international tax law publications, including Newsweek.
Mr Abad Garrido holds degrees in Law, Business Administration, and Accounting, complemented by postgraduate studies at IE Business School. He is a Certified Auditor registered with the Official Registry of Auditors (ROAC).
For legal enquiries, visit abadabogados.com or connect with Mr Abad Garrido on LinkedIn.
