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Non-EU property buyers in Spain to be targeted by new tax

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The sunspots of Spain's Costa del Sol are attractive to overseas property buyers. /David Benito/Getty Images
The sunspots of Spain's Costa del Sol are attractive to overseas property buyers. /David Benito/Getty Images

The sunspots of Spain's Costa del Sol are attractive to overseas property buyers. /David Benito/Getty Images

Spain will impose two new property taxes in a bid to tackle the country's housing emergency.

A tax of up to 100 percent on the value of properties bought by non-residents from non-EU countries was announced on Monday by Prime Minister Pedro Sánchez.

In a separate measure, Sanchez announced plans to raise taxes on holiday rentals so that they pay "like a business". The measure would be based on a new EU directive on value-added tax for digital platforms, he said. Spanish hotels now pay a reduced 10 percent VAT rate, which is included in the bill.

The premier told a Madrid economic forum on affordable housing: "The West faces a decisive challenge: To not become a society divided into two classes, the rich landlords and poor tenants."

Sanchez said non-EU residents bought 27,000 properties in Spain in 2023, "not to live in" but "to make money from them" which "in the context of shortage that we are in, [we] obviously cannot allow."

Almost half of that figure - 12,470 - were from the UK, which left the European Union in 2020.

Details of the policy were sketchy but Sanchez said they would be designed to prioritize available homes for residents. His office said the proposed measure would limit the purchase of homes by "non-resident non-EU foreigners."

It is one of a dozen planned measures announced by the Spanish prime minister aimed at improving housing affordability in the country. Other measures announced include a tax exemption for landlords who provide affordable housing, transferring more than 3,000 homes to a new public housing body, and tighter regulation and higher taxes on tourist flats.

"It isn't fair that those who have three, four or five apartments as short-term rentals pay less tax than hotels," Sánchez said.

Spanish Prime Minister Pedro Sanchez wants to tackle the country's growing problem of affordable housing. /Susana Vera/Reuters
Spanish Prime Minister Pedro Sanchez wants to tackle the country's growing problem of affordable housing. /Susana Vera/Reuters

Spanish Prime Minister Pedro Sanchez wants to tackle the country's growing problem of affordable housing. /Susana Vera/Reuters

Housing has become a major issue in Spain as it struggles to balance promoting tourism, a key driver of its economy, with concerns over high rents due to gentrification and landlords shifting to more lucrative, short-term tourist rentals, especially in urban and coastal areas.

Sanchez also promised tougher measures to combat fraud around such rentals, without going into details. Last month, authorities opened an investigation into Airbnb for failing to delete thousands of misleading rental offers from its platform.

In addition, landlords in high-rent areas who keep their rents in line with an official price index will get a 100 percent exemption for the tax on that income.

Sanchez said the government will promote the construction of social housing and cede 2 million square meters of residential land to a newly created public housing agency.

However, Sanchez's minority government faces a constant struggle to pass any bill in a fragmented parliament. His Socialist Party's housing proposals have drawn criticism from both the right - which labels them as too interventionist - and hard-left allies, who accuse the centrist Socialists of being too tame with abusive landlords.

Last year, the Bank of Spain recommended that authorities intervene in the rental market, as the high proportion - compared to other EU countries - of households overstretching to pay their rents could lead to "adverse economic and social effects."

Several protests have taken place amid rising anger from citizens who feel they are being priced out of the Spanish market as renting becomes more frequent in a country traditionally made up of homeowners.

Source(s): Reuters
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