Spain's 100% Property Tax: impact on foreign buyers and alternatives

In January 2025, Spain proposed a 100% property tax on homes bought by non-EU residents, which could affect buyers from the UK and the US.

This move could change how foreign buyers invest in Spanish real estate, but it’s still just a proposal and needs approval from parliament to become law. 

Will it happen or not?

If you’re thinking about buying a holiday home in Spain, you’ll want to know how Spain’s 100% property tax might impact you. In this article, we’ll explain the potential effects of the tax and explore alternatives to minimize tax liabilities for foreign buyers outside of the EU. 

What is the 100% property tax in Spain?

Prime Minister Pedro Sánchez has proposed a 100% property tax in Spain for foreign buyers in response to the country's rising housing costs.

This tax targets non-EU foreigners, such as buyers from the UK, the US, or Latin America who will be affected if the proposal becomes law. 

How does Spain’s 100% property tax impact foreign buyers?

Although the proposal is not yet finalized, it could discourage foreign investors outside the EU from buying property in Spain. Sellers may also be forced to lower prices, especially in areas with many foreign buyers.

Investors who purchase property for rental income might see a significant drop in their return on investment because the tax would raise upfront costs and reduce long-term profitability.

For those looking to buy a second home or retire in Spain, now might be a good time to act.

In the future, if the tax becomes a reality, it could make the country a less attractive option for vacation homes or long-term living. Retirees, especially from the UK but not only, may start looking at alternative destinations with more favorable tax policies, such as Portugal.

When will the 100% property tax be applied in Spain?

No official timeline has been provided, and there is no confirmed date for its implementation. However, just days later, Sánchez proposed a total ban on such property purchases.

Any proposed changes would need to be approved by the lower house, where Sánchez's minority government faces significant challenges in gaining legislative support.

It may not even happen.

What alternatives do foreigners have to avoid Spain's 100% property tax?

If the 100% property tax becomes a reality, foreign buyers outside of the EU can consider the following alternatives:

• Accelerating the buying process if they have already decided to purchase property in Spain
• Obtaining residency before buying property in Spain 
• Securing residency in an EU country which may open up more straightforward access to Spanish property
• Exploring alternative investment destinations like Portugal, Italy, or Greece

Any legal resident of Spain, including foreign residents, can purchase property here. This means moving to Spain and living here to make the purchase. 

Foreign buyers may consider applying for a business visa, non-lucrative visa, or even the Digital Nomad Visa, which Spain introduced in 2023.

What are the property taxes in Spain for non-residents right now?

Property taxes in Spain vary based on the property type and the region.

Buyers can expect to pay an additional 6.5% to 12.4% of the property’s value in taxes and fees, which include property taxes, notary fees, registration, and appraisal costs. 

To get a clear overview of the taxes, use the Homevest calculator to see what you'll need to pay from your own funds when buying property in Spain.

The fees vary depending on the region, property type, and service provider.

Impuesto de Transmisiones Patrimoniales (ITP) or Transfer Tax is applicable when purchasing a resale property. It varies by Autonomous Community and ranges from 6% to 10% of the property's price.

Value Added Tax (VAT) or IVA is applied to newly built properties in Spain, calculated at 10% of the purchase price, except in the Canary Islands, where the rate is 6.5%.

AJD or Stamp Duty varies across different regions, typically ranging from 0.5% to 2% of the purchase price.

Rental tax

If you plan to rent out your property, rental income is taxed at rates ranging from 19% to 24%, depending on whether you are an EU citizen or not.

Wealth tax

Wealth tax (Impuesto de Patrimonio in Spanish) is applied to your assets if the total gross value of your holdings in Spain exceeds 2 million euros.

In Spain, the more wealth you have, the higher the tax rate, as it is a progressive tax. 

For example, the national rate, used in regions without their own tax system, ranges from 0.2% to 3.5%.

How does property tax in Spain compare to Portugal for foreign buyers?

In contrast, Portugal offers tax incentives for non-residents, such as the Non-Habitual Resident (NHR) status, which provides foreign residents and investors with reduced tax rates and exemptions on certain taxes.

"As of 2024, Portugal's Non-Habitual Resident (NHR) status offers a reduced IRS rate of just 20% for up to 10 years, potentially lower than what you're paying in your home country. However, to qualify, you must be employed in scientific research, higher education, or certain key sectors such as start-ups or roles deemed essential to the national economy by the Portuguese Investment and Foreign Trade Agency (IAPMEI)”, explains Reorganiza, a digital mortgage broker in Portugal. 

Property taxes in Spain vs Portugal

Property prices vary significantly in both countries based on location, size, and type of property.

Cities like Lisbon and Madrid tend to have higher prices, while rural areas are more affordable.

Property Transfer Tax (IMT in Portugal vs. ITP in Spain)

Portugal: The IMT ranges from 0% to 8% of the property’s purchase price, depending on the value and type of property.

Spain: The Property Transfer Tax (ITP) varies by region, typically between 6% and 10% of the purchase price, depending on the Autonomous Community.

Stamp Duty

Portugal: Typically 0.8% of the property’s purchase price.

Spain: Stamp Duty (AJD) varies by region, generally ranging from 0.5% to 2% of the purchase price.

Notary and Registration Fees

Portugal: Usually around 1% of the property value, covering legal formalities.

Spain: Similar fees exist, generally ranging from 1% to 2% of the property value.

While the types of costs are similar in both countries, Portugal tends to have lower rates for some taxes, such as the Property Transfer Tax (IMT), when compared to Spain’s regional variations in the Property Transfer Tax (ITP).

Wealth tax in Spain vs Portugal

Portugal does not have a nationwide wealth tax, but applies a property tax on high-value real estate (more than 600,000 EUR). For properties above 1 million EUR, there is a flat rate of 1%. 

Spain has a wealth tax that applies to individuals' global assets, with rates ranging from 0.2% to 3.5%.

Rental income in Spain vs Portugal

Non-residents renting out property in Portugal are taxed on their rental income at a flat rate of 25%, without being subject to the progressive rates that apply to residents. 

In Spain, the tax rate depends on whether you are an EU citizen or not, ranging from 19% to 24%.

Which is a better option for foreign buyers: Spain or Portugal?

Portugal might be more attractive for foreign buyers, especially with benefits like the Non-Habitual Resident (NHR) status. 

Property transfer taxes are usually lower in Portugal than in Spain, but Spain’s wealth tax may affect wealthier individuals. 

Both countries offer competitive rental tax rates for non-residents, with Portugal charging a flat 25%. In contrast, Spain's rates depend on whether you're an EU citizen.

If the 100% property tax is implemented, Portugal will become even more attractive to non-residents looking to buy a second property in a sunny location. 

When it comes to mortgage options, there are many opportunities and benefits available. For instance, non-residents can access up to 80% of a mortgage in Portugal, with interest rates identical to those offered to residents.

Use the Homevest fast mortgage calculator to see your affordability and connect with mortgage brokers to help you secure a mortgage in Portugal faster.

Resources used in this article in January 2025: 

1. Spain proposes 100% tax on homes bought by non-EU residents
2. Spain's PM Sanchez floats ban on non-EU citizens buying properties
3. Taxes and fees when buying a property in Spain
4. Taxes on rental properties in Spain
5. Wealth tax in Spain
6. Portugal Non-Habitual Residency Regime
7. Real estate taxes in Portugal

We recommend obtaining professional or specialist advice before taking or refraining from any action based on the content in this article. The information in this article does not constitute legal, tax, or other professional advice from Homevest Limited. Prior results do not guarantee a similar outcome. We make no representations, warranties, or guarantees, whether express or implied, that the content in this article is accurate, complete, or up to date.