Spain’s Proposed 100% Tax Increase on Property for Brits
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Everything You Need to Know About Spain’s Proposed 100% Tax Increase on Non-EU Buyer Property Purchases
Recent reports surrounding Spain’s proposed 100% tax increase on property purchases by non-EU buyers, including Brits, have caused significant concern among potential investors. While Prime Minister Pedro Sánchez initially suggested such a measure, updated information reveals that this drastic proposal is unlikely to happen as originally stated. Instead, discussions are focusing on measures to increase taxes on non-EU buyers to address housing affordability issues. Here’s what you need to know, including how such changes could impact property buyers and strategies to avoid these taxes.
What Is the Current Tax Situation?
Spain’s Property Transfer Tax (ITP) currently applies to second-hand property purchases and varies by region, ranging from 6% to 10% of the property’s value. For new properties, VAT (IVA) at a rate of 10% is charged, along with stamp duty ranging from 0.5% to 1.5%.
What Could a 100% Tax Increase Mean?
If a 100% tax increase were implemented, the rates could effectively double. Here’s how this would translate for a property valued at €750,000:
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Current ITP (average 10%): €75,000
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Proposed ITP with a 100% increase (20%): €150,000
For a new property:
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Current VAT (10%): €75,000
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Proposed VAT with a 100% increase (20%): €150,000
This dramatic rise would make property investments substantially more expensive for non-EU buyers, effectively pricing out many potential purchasers.
Example Impact on a €750,000 Property Purchase
Let’s compare the costs for a non-EU buyer purchasing a property valued at €750,000 under the current tax regime versus the proposed increase:
For second hand properties:
Scenario | Current Taxes | Proposed Taxes |
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Property Value | €750,000 | €750,000 |
ITP (10%) | €75,000 | €150,000 |
Total Cost | €825,000 | €900,000 |
For new properties:
Scenario | Current Taxes | Proposed Taxes |
Property Value | €750,000 | €750,000 |
VAT (10%) | €75,000 | €150,000 |
Total Cost | €825,000 | €900,000 |
Why Are These Changes Being Discussed?
The Spanish government is seeking ways to address the housing affordability crisis, particularly in regions like Madrid, Barcelona, and coastal areas. Foreign investment, especially from non-EU buyers, has been cited as a factor driving up property prices, making it harder for locals to enter the market. While a 100% tax increase is unlikely to proceed as initially claimed, incremental increases in taxes for non-EU buyers remain a possibility.
How Can You Avoid These Taxes?
Non-EU buyers have a legal way to mitigate or avoid these taxes entirely: obtain Spanish residency before purchasing property. By becoming a Spanish resident, you are no longer classified as a non-EU buyer and may qualify for standard tax rates.
How Can Chorus Financial Help?
At Chorus Financial, we specialize in helping British expats navigate the complexities of living and investing in Spain. Our expert team can guide you through the process of obtaining residency via one of Spain’s popular visa programs, such as:
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The Non-Lucrative Visa (NLV): Ideal for retirees and individuals with passive income who do not plan to work in Spain.
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The Digital Nomad Visa: Perfect for remote workers seeking a base in Spain while working for a non-Spanish employer.
But we don’t stop there. At Chorus Financial, we are regulated and qualified experts in generic tax planning, pensions, and investments. This means we can offer a truly holistic process, from helping you obtain your residency, to assisting with your property purchase, and ensuring your finances and investments are fully optimized for life in Spain.
Key Benefits of Working with Chorus Financial
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Expert Guidance: Our award-winning team has over a decade of experience helping British expats transition to life in Spain.
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Tailored Solutions: We offer personalized advice tailored to your financial situation and residency goals.
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Proven Success: Chorus Financial has earned a reputation for honesty, transparency, and client-focused service, helping countless expats secure their dream homes in Spain.
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Holistic Approach: With our expertise in tax planning, pensions, and investments, we ensure that your financial future is secure alongside your residency and property goals.
Why Act Now?
The proposed tax is not yet confirmed but is under serious consideration. Acting now allows you to:
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Start the residency process early, as obtaining a visa can take several months.
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Avoid the rush of last-minute applications once the tax is implemented.
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Secure your place in Spain’s property market without unnecessary financial hurdles.
Frequently Asked Questions
Q: When will the tax be implemented? A: The tax is still in the proposal stage and requires parliamentary approval. However, it’s essential to be prepared in case it becomes law.
Q: Can existing property owners be affected? A: No, the tax would only apply to new property purchases by non-EU citizens.
Q: What happens if I start the residency process but haven’t completed it before the tax is implemented? A: As long as you’re classified as a non-EU buyer at the time of purchase, the tax would apply. This is why it’s crucial to complete the residency process before buying property.
Contact Chorus Financial Today
Don’t let the proposed tax deter you from your dream of owning property in Spain. With Chorus Financial, you can navigate these changes with confidence and avoid unnecessary costs. Contact us today to learn more about how we can help you secure your Spanish residency, invest in property tax-free, and optimize your financial future.
Qualified & Regulated Advice
Contact Chorus Financial today for a free, no obligation call with a qualified Financial Adviser in Spain. Provide brief information on what you need help or advice with, and let us know what part of Spain, or elsewhere, you are based in so we can assign the best Spanish based financial adviser for you.