Clarifying Spanish President’s Recent Tax Proposal: Providing Clarity and Calm for UK Investors in Spanish Real Estate

Clarifying Spanish President’s Recent Tax Proposal: Providing Clarity and Calm for UK Investors in Spanish Real Estate

From the Spanish Desk, as solicitors specialised in real estate transactions in Spain, we are aware that recent reports about a potential increase in taxes for property purchases by non-EU citizens, including British investors, may have caused some concern. We would like to take this opportunity to provide some clarity and reassurance on this recent development.

Firstly, it is important to note that this is currently just a proposal, not an enacted law. It has no immediate impact on current or future property transactions. For this proposal to become law, it must pass through both the Spanish Congress and the Senate. While the proposal will be debated in both chambers, it is ultimately the Congress who has the final say. Given that the Spanish President Pedro Sánchez’s government does not hold an absolute majority in Congress—currently holding around 28% of the seats—any such proposal would likely require support from other political groups to ensure its approval. Some have already expressed their disapproval. This means that, while it is true that the proposal is being debated, it still faces significant uncertainty regarding its passage, and its negotiations could take long time.

Depending on the complexity of the proposal and the political negotiations involved, the full legislative process can take 6 months to 1 year, sometimes even more. This includes several stages: an initial review and approval in Congress, potential amendments in the Senate, and the final approve after any changes are reconciled between both chambers. Therefore, while the proposal is a topic of discussion, it is still too early to determine whether it will be ultimately approved.

Impact on the Spanish Economy of British Investments

It is important to point out that British investment in Spanish real estate plays a significant role in the country’s economy. The UK has traditionally been one of the largest foreign investors in Spanish property, particularly in regions such as the Costa Blanca, Costa del Sol, Costa Brava and the Islands. British nationals contribute not only to the housing market but also to the broader Spanish economy through spending in local businesses, tourism, and various sectors related to homeownership.

If the Spanish government was to proceed with a tax that could deter British property buyers, it would risk losing a vital source of investment. The impact could be far-reaching, affecting not only the real estate market but also the wider Spanish economy. The housing sector, tourism, and local economies could see a reduction in revenue, particularly in areas where foreign ownership is significant. Spain will need to be very cautious about making decisions that could discourage future investment, as the long-term consequences of such a move could undermine its economic recovery and growth.

Previous Examples of Differentiated Treatment for UK Nationals

Additionally, it is important to highlight that Spain has already taken specific measures to address the status of UK nationals post-Brexit before. For example, Royal Decree 973/2020 introduced provisions for the residency rights of British citizens living in Spain before Brexit. This decree allowed UK nationals to maintain their residency rights and access to services, mirroring the treatment of EU nationals under the Withdrawal Agreement. This demonstrates that Spain has historically taken a differentiated approach when it comes to its relationship with the UK, and it is possible that similar considerations could apply to any future tax laws.

As legal advisors specialised in cross-border Spain/UK property law, we are actively monitoring developments and staying in close communication with industry experts. Our goal is to ensure that our clients remain well-informed and prepared for any potential changes. Should any significant developments arise, we will promptly update you.

In the meantime, we strongly encourage you not to make any rushed decisions based on speculative or incomplete information. If you are considering an investment in Spain or have concerns about the proposed changes, we are here to offer personalised advice and answer any questions you may have.

Together, we can navigate these potential changes and ensure that your investment plans in Spain remain secure and successful.

Claudia Font and Antonio Guillen are dually qualified Spanish lawyers and English Solicitors heading the Spanish Desk of law firm Gunnercooke.

For further information please contact [email protected]