The end of the ‘GoldenVisa’. Spain currently faces a housing shortage and rising property prices. To address this, the government has announced plans to end the ‘Golden Visa’ program by March 2025, which allowed non-EU nationals residency via investments of at least €500,000. The government has also proposed a series of housing policies.
What are the 12 policies announced by the government?
- A tax of up to 100% of the property purchase price for transactions made by non-EU nationals.
- A 100% allowance on rental income for landlords renting properties at or below the reference price index.
- Restricting the special tax regime for Spanish real estate investment trusts (REITs, Sp: SOCIMIs) to those providing affordable housing.
- Classifying tourist properties as an economic activity, subject to VAT, and introducing stricter regulations on short-term rentals.
- Expanding Spain’s public housing stock by transferring existing properties and land to the public sector.
How might the government implement a 100% tax on property purchases for non EU investors?
While the prime minister has not given specific details on how this tax will be applied, there are three primary taxes associated with property purchases in Spain:
- VAT: Applicable on the first sale of a property, currently set at 10%.
- Transfer tax: Levied on property purchases where VAT does not apply, ranging from 6% to 13%, depending on the autonomous region.
- Stamp duty: Applied to property purchases subject to VAT but not transfer tax, with rates between 0.5% and 2%, varying by region.
VAT is managed nationally, while transfer tax and stamp duty fall under autonomous regions, making it unlikely to adjust these regional taxes for non-EU buyers. Adjusting VAT is also challenging, as it applies only to first-time purchases and is tightly regulated by EU law.
The Spanish government may introduce a new tax, similar to the so-called ‘solidarity tax’, targeting non-EU nationals buying properties. This could bridge the gap between current property taxes (VAT, stamp duty, or transfer tax) and the proposed higher rate for non-EU buyers.
Who would this tax apply to?
More to the point, could this tax apply to purchases made through Spanish or foreign companies where the primary or sole shareholder is a non-EU national?
As with the previous questions, neither the Prime Minister nor the government has provided clarification or detailed explanations regarding these measures. Therefore, it remains uncertain how extensively this tax will be applied. To ensure its effectiveness, the legislation would need to be thorough and highly specific to prevent non-EU nationals from circumventing the tax by purchasing properties through corporate entities.
One potential approach might involve regulating based on the ultimate beneficial owner (UBO) of the company. If the UBO is identified as a non-EU national, the tax could be applied. However, this raises further questions: what happens if the entity has other shareholders who are Spanish or EU nationals? Would they also be subject to the tax, even if they don’t fall under its primary scope? Such scenarios highlight the complexities the government must address when drafting the legislation.
Notably, the Constitutional Court previously struck down laws denying foreign nationals certain tax benefits.”
Is this measure constitutional?
The Spanish Constitutional Court has previously upheld the legality of the solidarity tax, ruling that it did not amount to double taxation; suggesting that similar taxes or adjustments could be upheld.
However, the proposed tax faces potential constitutional challenges. A key concern is whether a tax rate of up to 100% of the property purchase price could be deemed confiscatory.
Another issue is possible discrimination against non-EU nationals, as the European Court of Human Rights has highlighted in similar cases.
Notably, the Constitutional Court has previously struck down laws denying foreign nationals certain tax benefits, ruling such treatment unconstitutional.
These precedents seem to indicate the proposed tax may face legal scrutiny if it disproportionately impacts non-EU nationals.
Conclusion
These measures raise many questions and interpretations. Definitive clarity will depend on any details the government publishes or new legislation, but this is unlikely to happen any time soon and it will very likely take some time to materialise.
Article written by Leon Fernando del Canto and originally published in Taxation.
Del Canto Chambers specialists are constantly up to date with new legislative changes and aware of any Spanish tax and legal implications. Contact our Spanish legal and tax specialists for the best tax planning and corporate structures in your circumstances.
The end of the ‘GoldenVisa’
