A few months back we posted about an idea floated by the government here in Spain to tax purchases of property to non-resident, non-EU citizens at 100% of the purchase price, effectively making a 300k purchase 600K. My response and advice was don't panic... at least not until we see the details. You can see the post here. I said that those reporting it as not 100% tax on property but 100% increase in property taxes to be paid were probably wrong, it was never that. And to think there are legal firms who read the proposals and came up with that! I also said that it will probably never happen. This week the government presented their draft proposal to parliament and my response is still, don't panic. It'll probably never happen and even if it does we already have ways around it.
The Bare Facts
The government is insisting that it wants to charge non-EU, non-resident buyers 100% on their purchase of Spanish property. But... and there is a but in this.... it will not be charged on new builds, only on second hand property. New builds are taxed as IVA (Impuesto de Valor Añadido or Value Added tax) not ITP (Impuesto de Tranmisiones Patrimoniales) which is the tax the government wants to raise. This is the first watering down.
In other words the building lobby has spoken to the government and said "What the actual f*ck are you doing!" in a very loud voice. This is because when somebody buys a property off plan or during construction and they don't know when building will be finished and at what time they would be able to pay and take possession without knowing the applicable tax at that moment... Well the sales funnel closes up right now and some builders aiming at the foreign market, for example most of those on the Spanish coast, would be forced into almost immediate bankruptcy.
**Unintended consequence = Raising the prices of ALL new builds as they now have greater demand.**
There's another little problem. Any tax charged at 100% in Spain can be considered confiscatory as opposed to just and that goes against the Spanish constitution. Challenges would be immediate and restitution could be very costly for any government doing this, apart from the reputational damage.
Another problem? The government sails this ship alone without a majority in parliament. They are under attack from all sides here. To the right all of the parties are against these measures. To the left there are other parts of the bill which they don't agree with, amongst which are the tax breaks for landlords. The nationalist parties see it as treading on their toes in their fiefdoms where they are the ones with tax raising powers.
But the problems don't stop there. As mentioned in last week's blog, these measures go against Article 63 of the Treaty on the Functioning of the European Union (TFEU) which prohibits all restrictions on the movement of capital within the EU and between the EU and third countries, within the framework of the provisions set out in that chapter. The free movement of capital is a fundamental principle of the EU single market. This law discriminates against third country citizens and their investments, their capital, so will be challenged at the European Court of Justice even if it happens. Spain doesn't need another big fine from the Commission.
And the biggest problem of all? There is an even bigger loophole which is going to cause a problem and it's not even really a loophole. If you get your residency first then you can buy. This will mean people will come to Spain on the Non-Lucrative Visa, the Digital Nomad Visa, the Highly Skilled Worker Visa or any of the many other easily obtainable visas, become residents very quickly on arrival and then buy, thus avoiding the 100% tax.
Some people will be put off for sure for the simple reason that they will believe the headline. After all if the Orange Shitgibbon can convince people that the Big Beautiful Bill is not just another way of saying "huge tax cut for Billionaires" then anything is possible. As Einstein said only two things are certain in life, the infinite nature of the Universe and the stupidity of MAGA voters*
*He may not have said those exact words but you get the picture.
Anyway, you don't have to believe me. Here is James from the Spain Unfiltered You Tube channel taking you through the current proposals and why they look dead in the water before even arriving. (And you should subscribe to James' channel if you are interested in knowing the background to a host of issues in Spain)
Unintended Effects
Investment in Spain by foreign capital might well plummet if this measure came into place as it would have to include investments in real estate by foreign companies too whether for residential or commercial purposes. If companies are given an exception then expect everyone who wants to buy a property to set up a company to purchase which is very easily done.
Equally, as a non-resident you could very easily buy an off the shelf Spanish SL company and use that as the vehicle to buy the property. You would lend the company money to make the purchase and then the company would “pay you back” over time as the mortgage holder.
You could also find that it would be advantageous for sellers who wanted to deal with a foreign buyer to have their own properties in a company structure to “sell” the company rather than the property. The company’s only asset would be the property. Hacienda, the Spanish taxman, doesn’t like this but that wouldn't be an issue if the buyer was another Spanish company.
The Biggest Unintended Consequence
The problem this is going to cause is huge if it happens as it will place more pressure on the already overstretched rental market pushing the prices of rentals even higher.
If rental prices go up then investors looking for returns on investment will buy more property to rent out reducing even more the properties that are available for first time buyers and others to buy.
Other unintended consequences will arise for sure. This is not a great idea!! (But I don't think it will get through parliament) I could be wrong (I won't be). They could put it through but as two lawyers I know very well have already told me, however this shakes out we will have a way around it that is totally legal. You can see that the holes in the proposed legislation are big enough to drive a coach and horses, a few Alsa buses, some AVE trains and plenty of profitable lawsuits through it. The government has picked the wrong target and is shooting at it with a fairground popgun from ten miles away with a blindfold on.
A small hint though to government. Do something about bloody short term rentals that is effective and protects people's homes and communities. You've made a start by making 65000 Airbnbs illegal recently, now take measures to stop them still being rented out illegally.
New Visa Rules and Regulations
If you are looking to move to Spain and live here then needless to say you need a visa. We have written about your visa options for coming to live in Spain on these pages before as usual, things move on and things change. This week there has been a new update passed to the immigration law which "simplifies" visa regulations and it may affect you so you need to know about the changes. We will be writing more about this when everything becomes crystal clear but there are some things that you need to know because we often get asked these questions.
Firstly if you are coming here on the non-lucrative visa there are no real changes except that it has been clarified even more that this visa is for people who will not be working here. You cannot do any type of work even if it is remote. Your funds must be from pensions, investments or savings to get this visa. If it is from savings then you need to show details of where the money is and has been for at least a year and demonstrate that you have had enough funds there at all times. In other words new accounts with a lump sum recently deposited by the bank of mum and dad will not be accepted. Therefore if that is the way you were going to do it then get that money in the account now and wait just over a year. You also need to prove you have been here for more than 183 days on renewals. That hasn't changed but now you have to prove it clearly (Which is weird but that's where we are right now).
By the way, if you want to work then the digital nomad visa is the one for you and there are no changes to the DNV apart from renewals being two years each time now rather than year on year.
There are changes to the student visa too. You now need to apply for the student visa from outside Spain for language courses. There is now a cap of two years on language courses that give you the student visa and the big change, you need to pass the first year!!! Previously you could fail and register again ;-). Also higher education students can work up to 30 hours a week but that's not true for people on language courses any more. Equally, no family members for those here to study the language which is a big change... ouch.
Other changes are not so significant for our usual clients but James Blick (Another James you should subscribe to) has a really good overview of the possible routes here.
Last Week In Valencia Property
We spent most of the last week between notaries again completing purchases prepared in the previous month. So what were people buying? An apartment in central Valencia for 220k (Now that was a deal!), a villa in L'Eliana for 482K, a villa in Lliria for 450k and a villa in La Pobla for 368K. So unusually more outside the city than in but today we have another city apartment purchase at 245K to redress the balance a bit. At the end of this month we will be doing one of our market overview posts so you can see what properties are selling and where. The last one can be seen by clicking on the image below.
Summer Holidays in Valencia 2025
The heat has arrived and we are looking at temperatures above 30ºc for the next ten days. Summer will be long and warm so take advantage of the newly opened beach bars on the Patacona, long evening strolls after the sun goes down and the swimming pool, whether it's your own in a villa, the municipal offerings in every town and village or even the big Mediterranean shaped thing just off the coast.
Regarding our work, as usual we are mostly closed for the month of August. If you tell us you will be coming in the middle of August to look at properties then we will be putting you off that idea. We have talked about why before but the main reasons are owners being away, properties being rented out at high prices for the summer, agents being closed, notaries being away, lawyers being away, the difficulty in getting anything official done and the fact that it's difficult to work in the heat of the day. For those of you who cannot avoid your visit being in August then we will see what we can do. Someone from our team might be around to help you out but there are no guarantees and equally your choice is more limited. Book your visit with us as soon as possible at all times of the year but especially in the summer because if you just turn up a day before then I'm sorry but we cannot help you (And probably neither will anyone else). You can see how to work with us at Valencia Property at the link or by clicking on the image below.
Property of the Week
Modern Villa With Spectacular Views in Naquera 900K
We live in strange times. The Doomsday Clock is at 89 seconds to midnight apparently, which sounds generous to be honest. Its hard to know what’s coming next. A pandemic, bond market crisis in the US, war in the middle east, war in Kashmir, country-wide power cuts. And then when you think nothing can surprise you any more, Spurs win a trophy! That on its own should move us a few seconds closer to midnight.
So if the world is coming to an end, where are you going to enjoy the show from? It may as well have a good view, like this villa on the edge of Naquera town. On a large plot, with commanding views across the Sierra Calderona and the Gulf of Valencia with a tennis court and swimming pool. (Read More Here)
Some Past Reading
Quite often we get told how good the blog is and that people are surprised with the wealth of information available. It's designed that way but finding the information you need can be difficult after so many years of writing. Today therefore we thought it would be good to point you to some of our older posts... take a look and have a read. Just click on the images below for more Valencia Property goodness.
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