Hola,

Many clients are contacting me regarding the headlines recently following the news that Pedro Sanchez has mentioned that the government may levy a 100% tax on non EU nationals purchasing property here in Spain.

This news came as much as a shock to us as it did to other agents, lawyers and of course potential clients looking to purchase in the future.

I hope this short but informative note will clarify a few matters and delve amongst the headlines to reveal a little more to make a confusing headline a little more understandable.

Why?

Firstly the news conference in which Pedro Sanchez made this point was around 3 hours long and the mention of the 100% tax was about a minute in duration. There was no explanation of what this tax is, how it will be applied, the words may and upto were not explained at all.

It is worth remembering that Pedro Sanchez rules a difficult coalition government made up of many different factions all with different agendas. Also all the opposition parties would be totally against this (more about this a little later).

Spain in in the midst of a serious housing crisis….. Simply not enough social housing is being built to accommodate the demand. This is being exacerbated by the the rental laws which give all the security to the tenant and little protection to the landlords. This in turn means that landlords are either inclined to not rent at all, dramatically raise the rents or decide to use the property for short term holiday rentals and like Air BnB.

What the government are doing is trying to address the housing crisis and these headlines make it sound like they are doing something about it…… when in essence these actions will make little impact and may in-fact cost the country revenue.

Likelihood of Implementation:

The proposal requires parliamentary approval, and given the government’s minority status, it is likely to face significant opposition from various political parties and industry stakeholders. Critics have labeled the measure as “xenophobic” and “ideological,” suggesting that it may not pass without substantial debate and potential amendments.

Legislative Process and Timeline:

If pursued, the proposal would need to be introduced as a bill and undergo the standard legislative process, including debates and votes in both houses of Spain’s parliament. The timeline for such a process can vary but typically spans several months to over a year, depending on the complexity of the legislation and the level of contention.

Autonomous Regions’ Role:

Spain’s autonomous regions ( like Valencia, Murcia, Andalusia) have varying degrees of authority over housing policies. While the national government can set overarching tax policies, implementation and enforcement may require cooperation from regional governments. Some regions, particularly those benefiting from foreign investments (like our own region of Valencia), may resist or seek exemptions from the proposed tax, potentially leading to a fragmented application across the country. To summarise this section, the government controls overall tax (VAT), however the autonomous regions control the purchase tax (which the government are seeking to increase). It is highly likely that for example the Valencian government which is controlled by the PP political party would fight tooth and nail against this tax due to the impact on revenue.

Conclusion:

While the proposal underscores the government’s commitment to addressing housing affordability, its implementation faces significant legislative hurdles and opposition from various stakeholders. The complexity of Spain’s political landscape and the economic implications for regions dependent on foreign investment suggest that the proposal may undergo substantial revisions, if not outright rejection, during the legislative process.

This story has a long, long way to run and many hurdles to overcome if it is to be enacted. These are of course my own musings based on the information available to me. We will of course keep everybody informed of where this statement ends up….. but if you are looking to purchase in Spain and you are non EU, then sooner may be safer than later……. But then again you would expect an estate agent to say that 🙂

Steven

16.01.25