Spanish Government proposes a new tax on Non-EU Foreign Buyers
The Spanish Socialist Workers’ Party (PSOE) in 2025 has proposed a new law aimed at promoting affordable rental housing. Although the package includes several tax reforms, the most controversial measure is the creation of a State Complementary Tax bill on Transfer Tax to Non-Residents in the European Union. This new tax would affect non-EU foreign buyers purchasing property in Spain. The stated goal: to curb speculative pressure in the housing market. But… at what cost?
What exactly does the law propose?
The law introduces a new tax exclusively for non-EU residents who purchase property in Spain or acquire real rights over it (life interest, bare ownership, right of use and habitation, etc.). This tax would:
- Be added to the existing Transfer Tax (ITP).
- Apply a 100% rate on the taxable base calculated mainly on the cadastral reference value or market price, whichever is higher.
- Not apply to EU or EEA citizens, but would affect buyers from the rest of the world, including British, American, Canadian, Chinese, Arab, Latin American nationals, etc.
How might it be implemented?
The law proposal stipulates that:
- The management and collection would be handled by the central government, not the regional governments.
- Payment would be mandatory through self-assessment, like other indirect taxes.
- It would not be deductible in other taxes, except for the amount already paid under the regional transfer tax (ITP).
- The General Directorate for Cadastre would determine the applicable fiscal value of the property, which could only be challenged after assessment if the purchase price was lower.
- It would not apply to new build houses, only to resales. So no extra tax on off plan property purchases.
Is this tax legal? Constitutional and international concerns
The measure has sparked a wave of criticism among legal experts, economists, and international law specialists. The reasons are multiple:
1. Potential unconstitutionality
- Article 14 of the Spanish Constitution: prohibits any discrimination based on nationality. Although the law refers to residence status, in practice it indirectly discriminates against foreigners.
- Article 139.2 of the Constitution: states that “No authority may adopt measures which directly or indirectly hinder the freedom of movement and establishment of people and the free circulation of goods within Spanish territory.” In other words, this article guarantees that no legal barriers impede the movement of people and goods within Spain. This new tax would break tax equity by taxing the same transaction (property purchase) differently depending on the buyer’s origin.
2. Incompatibility with European Union law
EU law states that Member States may not treat citizens of other EU countries differently solely on the basis of their tax residency. The EU also prohibits restrictions on the free movement of capital, even with third countries (Article 63 of the Treaty on the Functioning of the EU).
In several cases, the Court of Justice of the European Union (CJEU) has struck down tax practices that discriminated against non-residents, such as higher tax rates or less favorable rules. This kind of discrimination has been annulled in countries like France and Portugal after rulings from the CJEU when they attempted to impose higher taxes on non-residents.
3. Violation of Public International Law
Many bilateral investment treaties signed by Spain guarantee equal treatment and protection against fiscal discrimination.
Affected countries could initiate international arbitration (e.g., before ICSID) or impose trade countermeasures.
What about the economic impact?
Spain is one of the world’s most attractive destinations for foreign real estate investment, particularly in areas like Costa del Sol and Costa Blanca.
This tax could have an immediate deterrent effect, reducing the inflow of foreign capital, weakening demand, and slowing down the property market in coastal areas that rely heavily on this type of investment.
When could this be introduced?
The law has to go through Parliament and the Senate so this could take time and could be at least 6 months to get approved, if approved at all.
How it affects you?
If you are in the process of purchasing a property, complete it sooner and before the law comes into force, if it comes into force. The tax would be 100% of the value of the property. So if you are buying a property for 100,000 euros, the tax contemplated would also be 100,000 euros however this is a draft law at the moment and can change as it progresses through Spanish Parliament.
Time is on your side to consider….
If you are moving to Spain to become a resident, we would suggest you complete the property purchase after becoming a resident.
If you are buying a Spanish property for holiday use and to rent out, it is worth considering purchasing a property in the name of a Spanish company.
If you are buying an off plan property, it will not affect you.
Conclusion: Who wins and who loses?
The new tax on non-EU residents appears more symbolic than effective, with a clear ideological bias against foreign speculation. Since 2022, there have been around 60,000 property transactions per year by non-residents, representing only 8.4% of the total.
On one hand, the tax could be declared unconstitutional or struck down by European courts. On the other hand, its real impact on housing accessibility is very limited, while the collateral damage to investment, residential tourism, and legal certainty could be severe.
Furthermore, the proposal is politically fragile: the PSOE does not hold an absolute majority in Parliament and will need support from other parliamentary groups to push it through. Given the legal and fiscal nature of the measure, it is unclear whether it will receive sufficient backing even from within its own political bloc. This turns the proposal into more of a statement of intent than a law with any real prospect of success.
If the true goal is to improve access to housing, it may be time to strengthen public housing, improve urban planning regulations, and enhance legal certainty. Selectively penalizing foreign investors may bring more cost than benefit.
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