Proposed Tax on Property Purchases by Non-EU Residents

By Corina Pons and David Latona

MADRID (Reuters) – Spanish Prime Minister Pedro Sanchez’s opponents on Tuesday labeled a proposed tax on property purchases by non-European Union residents as “xenophobic”. They stated they would refuse to apply the tax in regions under their governance.

Opposition Statement

Luis de la Matta, communications director of the People’s Party (PP), said, “The problem is not that people want to live in Spain; the problem is that there is a lack of housing. We are not going to facilitate a xenophobic measure.”

Urgent Housing Challenge

Resolving the housing crisis has become one of Sanchez’s most pressing challenges due to a chronic shortage of affordable homes and rising rent prices. On Monday, his Socialist government proposed to limit home purchases by non-EU residents by increasing the applicable tax by as much as 100% of a property’s value, citing similar measures in Denmark and Canada.

Tax Implementation

The proposed tax would require approval from a fractured parliament and would be enforced by Spain’s regional governments. The PP governs many regions favored by British and Latin American second-home buyers, such as Andalusia, Valencia, the Canary Islands, and the Balearic Islands.

The tax, called the Property Transfer Tax (ITP), could affect approximately 26,000 second-hand properties in large cities and coastal areas popular with tourists, according to a Housing Ministry source.

Potential Impact on Foreign Investment

Spanish real estate platform Fotocasa warned that the tax might deter foreign investment, although its effectiveness is in question since only 2% of homes in Spain are purchased by non-EU residents. Currently, homebuyers in Spain pay between 6% and 13% ITP tax depending on the region.

Government’s Commitment

Housing Minister Isabel Rodriguez challenged opponents to thwart a plan she believes would increase the housing supply. “If someone wants to put a spanner in the works, they will have to answer to the people,” Rodriguez stated during a press conference.

Local Reactions

The Catalonia Tenants’ Union noted that most foreign buyers in the region are from the EU and described the tax proposal as “grandiloquent but irrelevant.”