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Recently, the President of the Spanish Government announced the intention to implement stricter laws regarding real estate acquisitions in order to address the growing housing crisis.
Measures to address the Housing Problem in Spain
On Monday, January 13th, a plan was presented to mitigate the housing accessibility crisis and the high rental costs in Spain, with the aim of ensuring "more housing, better regulation, and greater support", according to the President of the Spanish Government.
In this context, one of the most significant aspects of the plan is the proposal to limit the acquisition of homes by foreign nationals who are not residents of the European Union. The proposal suggests increasing taxes on properties purchased by non-EU citizens who are not residents of any EU member state to up to 100%. This measure aims to curb property purchases by foreign investors, since it is considered that many are acquiring properties for speculative purposes or as second homes.
This is just one of the 12 key areas outlined as part of the strategy to address the housing crisis affecting various regions.
Possible ways to implement the Tax
Several options are being evaluated to introduce a special tax on property purchases by non-resident foreigners from countries outside the EU. This measure is being considered alongside a potential modification of the Onerous Property Transfer Tax, both part of the actions designed to address the real estate crisis.
These two alternatives have been highlighted as the most viable options:
- Modification of the Property Transfer Tax (TPO): it is suggested the possibility of modifying the tax base for the purchase of second-hand properties. This alternative would not affect the purchase of new properties, as the tax applies to second and subsequent property transfers. Additionally, as this tax is delegated, Regional Governments have the authority to regulate the tax rate and other aspects of the tax.
- Creation of a New Specific Tax: In principle, it is not possible to establish a tax that targets the same taxable event already covered by another existing tax, as this could lead to legal and fiscal complications.
Both measures would face challenges under EU law, as they would create unjustified differentiation between residents and non-residents in comparable situations. In previous cases, the Supreme Court has emphasized that imposing differential tax treatment based on residency constitutes a violation of EU law.
Other measures in the action plan for the crisis
Other key initiatives within the plan to address the current housing crisis in Spain were also revealed, including the following:
- Reforming the taxation of tourist rental properties to treat them as businesses, with potential VAT application.
- Toughening regulations aimed at preventing fraud in seasonal rentals, with the creation of a fund to strengthen inspections and sanction illegal accommodations.
- Offering tax incentives to owners of affordable housing, providing guarantees to those owners and tenants who comply with affordable rental regulations.
We thank Sara Guisado, tax advisor of the Tax practice, for writing this article.