Spain pushes forward with tax that will double property price for foreigners

On Thursday, Spain’s PSOE-led government lodged a draft bill in the Spanish Congress aimed at addressing speculation in the housing market through a series of fiscal measures.

This bill includes plans aimed at limiting the number of tourist apartments in Spain, ensuring the availability of public housing stock, incentivising lower rental prices and, most headline-grabbing of all, curbing home purchases by non-resident third-country nationals.

What many thought could be political grandstanding when Pedro Sánchez first announced last January that his government would impose a 100 percent tax on non-EU non-resident property buyers in Spain now seems closer to reality, albeit a law that will still require parliamentary approval.

According to the legal text for the so-called "Complementary State Tax on the Transfer of Real Estate to Non-EU Residents", this tax "will be obtained by applying a 100% tax rate to the taxable base”, which is the value of the property in question.

Therefore a 100 percent tax on a property worth €200,000 would mean non-EU non-resident buyers would have to pay €400,000 for it.

"We're going to ban non-EU foreigners who don't live in our country from speculating with the housing our country’s families need," Sánchez said back in January.

The Spanish premier justified the proposal due to the apparently negative impact that wealthy non-resident buyers are having on prices and therefore the housing crisis, although official data has shown that the specifically targeted group - non-EU non-resident buyers - represent only between 1.6 and 3 percent of the total.

READ MORE: Are non-EU property buyers really to blame for Spain's housing crisis?

Foreigners as a whole however do now account for nearly 1 in every 5 property purchases in Spain, but this includes residents and EU citizens.

Spain’s decision to limit foreign property ownership has made headlines around the world, especially in the United Kingdom, given that Britons are still the main foreign property buyers in Spain.

READ MORE: Which foreigners are buying the most properties in Spain?

Brexit has meant they no longer have EU citizenship, therefore UK nationals who don’t reside in Spain but want to buy a second home here would have to pay double the price for a property.

In recent months, there have been other attempts to pass legislation that would limit foreign property ownership, all of which have failed.

Political groups in the Canary and Balearic Islands - both very popular tourist spots where foreign home buyers are undeniably shaping the local property market - have unsuccessfully asked the EU for help and suggested limits on non-residents in government meetings.

In late March Catalan separatist party ERC presented its own initiative to force resident foreigners - rather than non-residents - to have to apply for the right to buy homes if they have lived here for under five years in the country. This proposal was also rejected.

However, if it’s Spain’s national government that is pursuing such limits on foreign home ownership there is a higher chance that it will come to fruition, especially keeping in mind that only last month they effectively scrapped the golden visa scheme for wealthy non-EU foreigners as promised a year earlier.

Sánchez even suggested that his government was considering banning non-EU non-residents altogether from buying homes in Spain if they had no ties to the country, but now it seems his administration's focus will be on the so-called 'supertax'.