Spain’s Proposed Property Tax Hike for Non-EU Buyers: What You Should Know Before You Invest

In January 2025, Spain’s Prime Minister Pedro Sánchez introduced a controversial proposal to increase property transfer tax (ITP) for non-European Union (non-EU) buyers, effectively doubling the rate they currently pay. While the announcement raised eyebrows and headlines, much of the reporting has been inaccurate or misleading.

If you’re considering investing in Spanish real estate and are unsure how this may impact your plans, here’s a clear and up-to-date breakdown of what’s really going on.

1. This Is Just a Proposal and Nothing Has Been Passed Yet

The proposal is to raise the property transfer tax (ITP) specifically for non-EU residents. While the increase would double the rate paid compared to EU residents, this law has not yet been passed and there is no certainty it will be.

The intention behind the proposal is to help local Spanish buyers, who are perceived to be at a disadvantage due to increased foreign demand. However, international buyers, particularly in regions like the Costa del Sol, Costa Blanca, and the Balearics, play a vital role in supporting local economies. Discouraging this investment could have serious unintended consequences.

Given the Spanish government's narrow majority and political complexities involved, the proposed law may face significant delays or be blocked altogether.

2. It’s Not a 100 Percent Tax. It’s a 100 Percent Increase on the Current Rate

Despite misleading headlines, this proposal does not mean you would pay 100 percent of the property value in tax. Rather, it’s a 100 percent increase of the current ITP rate for non-EU residents.

To put that into perspective:

• Andalucía: from 7 percent to 14 percent

• Murcia: from 8 percent to 16 percent

• Valencia, Madrid, Catalonia: from 10 percent to 20 percent

• Canary Islands: from 6.5 percent to 13 percent
  

So, a €200,000 property in Valencia could result in €40,000 in transfer tax if the proposal is enacted, not €200,000 as some articles have falsely suggested.

3. The Tax May Not Apply Nationwide

Spain’s tax system is highly decentralized. Regional governments set their own ITP rates and can offer incentives or reductions depending on local economic goals. For instance, areas like Galicia and Extremadura are actively encouraging foreign investment with reduced tax schemes.

As a result, it’s unclear whether this proposed increase would apply uniformly across Spain or only in high-demand areas like Madrid, Barcelona, or Málaga. Until official legislation is tabled, no firm conclusions can be drawn.

4. The Proposal Could Be Challenged in Court

Spain has previously faced legal challenges over tax discrimination between EU and non-EU residents. In 2014, the European Court of Justice ruled that Spain’s inheritance tax system was discriminatory toward non-EU residents. Spain was forced to amend the law and reimburse affected parties.

Legal experts suggest that if passed, this proposed tax could face a similar challenge and may be overturned for breaching principles of fair treatment under international law.

5. There Are Legal Avenues to Avoid the Increased Tax

If the tax is eventually passed, there are still ways to mitigate or avoid it

• Buy Before the Law Takes Effect: The current rates still apply, and the proposal could take a year or more to come into force if it does at all

• Obtain a Non-Lucrative Visa: If you become a Spanish resident before purchasing, the increased tax wouldn’t apply

• Buy Through a Spanish Company: Structuring the purchase under a locally registered company may exempt you from non-resident taxation
  

This proposal is still at the discussion stage and far from becoming law. While it’s wise to stay informed, there is no immediate need for alarm. Buyers who act now or explore alternative purchase structures can still move forward with confidence.

If you're considering buying in Spain and want expert, honest advice on how this may impact you or how to structure your purchase to protect your investment, get in touch with the team at CasaNova.

We’re here to guide you through every step of the process with clarity and confidence.

📩 Contact Us today to schedule a consultation info@casnovahq.com