On January 13th, Spanish Prime Minister Pedro Sánchez announced a tax on nonresident non-European Union homebuyers of up to 100% of the value of the property. Nothing much happened for the next few months. The Spanish Government’s inability to approve a Budget (where the new tax would have been included) seemed to put the idea on ice.
Until May 22nd. On that day, the Spanish Socialist Party (PSOE) registered in Congress a Draft Bill that revived the proposed tax. What will happen now?
1. The new Draft Bill
The first idea to underline is that the Draft Bill has been presented by the Socialist Party, not by the Spanish Government. This is legal but extraordinary. When a given party is in power, the usual procedure for it to present Bills is through the Government. This provides an important quality control of the Bill, since it must pass through all sorts of official filters. These controls have now been sidelined in the name of expediency. PM Sánchez has followed this same technique with other controversial Bills (e.g. the Amnesty of Catalan separatists in exchange for their support of his investiture). No official explanation has been given on why the Bill has been presented in this exceptioonal way. In fact, no press conference was given to explain the Bill at all.
Let us consider now the contents of the Draft Bill. It is ostensibly directed to tackling the very real problem of rising house prices in Spain and the difficulty Spaniards have in buying or renting homes. It is, however, a Fiscal Bill. It raises all sorts of taxes. It will, for example, apply a 21% VAT to AirBnB stays, raise the tax rate on SOCIMIs’ (the Spanish REITs) non-distributed profits on rentals from 15% to 25% or increase the personal income taxes on empty and secondary flats.
As to the new tax on non-residents (1), it would, in effect have a rate of 100% of the value of the property and would also apply to the creation and assignment of real rights. Debts would not be deductible, but the existing Property Transfer Tax (up to 10% in Baleares, 7% in Andalucia or 6% in Madrid) would be deductible.
The new Tax is included in article 4 of the Draft Bill and has been technically worked upon (probably with the help of official Spanish Tax Authorities); it includes 19 subsections distributed in 6 pages.
2. Will it be approved?
PM Sánchez does not have the sufficient majority in Congress to pass a Budget. Will it have the sufficient majority to pass this Bill?
The first test will be in late June. The admission of the Draft Bill will then be debated and voted in the Congress Plenary (the Bill was probably registered this week in order to meet the deadline for its debate in June; otherwise, it would have been delayed until September). Even if it is admitted for further consideration, it could still be shelved, as has happened with many other draft Bills. To be continued…
1 It has been christened as follows: “Complementary State Tax on the Transfer of Real Estate Property to Non-Residents in the European Union.»
