Nerea Llona, Tax & Legal Counsel – Spain & LatAm, at Utmost Wealth Solutions, says the recently proposed property taxes on non-EU residents could create significant challenges for investors based outside the EU.
To recap, the Spanish Government has recently presented to the Congress a new draft bill that intends, amongst other things, to impose a new indirect tax on real estate property transfers equivalent to 100% of the purchase price on Spanish properties acquired by non-EU resident individuals or entities.
Additionally, it increases the VAT taxation of holiday lets to the general rate of 21% and reduces the tax benefits previously established for Spanish REITS (e.g. SOCIMIS), whilst including certain tax incentives for renting housing at affordable prices.
Nerea Llona commented: "These draft measures are likely to cause significant uncertainty for many HNWIs that either have or are considering investing in the Spanish property market. Should they progress, these would impact investors currently resident in Latin America, USA, UAE, UK, Norway, or Switzerland, who usually invest in Spanish real estate first, before then deciding to become residents as part of their pre-immigration planning."
"This new proposed tax would see buyers and investors living outside the EU subject to a 100% transfer tax on the price of any Spanish located property, apart from the Basque Country and Navarre. It aims to support the Government’s goal of keeping housing affordable and available for Spanish residents.
"For now, the draft bill is just in its initial stage, so it must go through the appropriate legislative process where changes can be introduced. Additionally, there are already indicators that it may not comply with EU Laws or the European Economic Area Agreement for being discriminatory - as has happened already in the past with similar issues that were denounced to the European Commission and the European Court of Justice - so there can be no certainty that it will be implemented as originally intended.
"Despite this controversial announcement, with professional tax and legal advice, Spain still offers plenty of planning opportunities and remains well-positioned to continue attracting wealthy families from all over the world thanks to its favourable business environment, climate and excellent education among other factors."
