PSOE, which is the party currently governing Spain, has recently submitted a draft bill to the Spanish Congress containing a series of measures that, according to that party, aim to improve access to housing.
Among these proposals, one in particular has drawn significant attention: the proposal of a new national tax targeting non-residents of the European Union who purchase real estate in Spain.
This new tax, referred to as the “State Supplementary Tax on the Transfer of Real Estate to Non-EU Residents,” would apply to purchases of second-hand homes made by individuals residing outside the European Union.Therefore, it would not apply to purchases of newly built properties (when buying from a property developer), nor to transactions in which both the buyer and the seller are companies or professionals. It would also not apply to foreigners who are tax residents in Spain at the time of purchase.
What is most controversial is the financial scope this tax would have, should it be approved.
The tax basis would be the reference value of the property, which is a value provided by the Cadastre. Or the purchase price, if it is higher than the reference value, which is usually the case.
A tax rate of 100% would be applied to this tax basis, meaning that the buyer would literally pay a staggering tax that could be equal to the value of the property purchased, although the transfer tax already paid to the autonomous community could be deducted.
In our view, if this proposal were approved, the tax would be unconstitutional.
On one hand, it could be considered a confiscatory tax, as applying a 100% tax rate would go against constitutional principles.
Furthermore, it would also violate EU law by affecting the free movement of capital, a right that, according to the UE Court of Justice also protects citizens of countries outside the European Union.
In short, we understand that this proposed tax is a political move by the government aimed at curbing property purchases by non-EU foreigners. However, we see little chance that it will be approved, and even if it were, that it would be upheld by the Constitutional Court.
In any case, the news undeniably represents a clear disincentive for foreign investment in real estate located in Spain.
