Alberto Artamendi
Cases & Lacambra, Barcelona
alberto.artamendi@caseslacambra.com

Ernesto Lacambra
Cases & Lacambra, Barcelona
ernesto.lacambra@caseslacambra.com

Spain’s tax framework for real estate investment is undergoing significant changes. Soaring rental prices have alarmed regulators and daily headlines reflect a stream of new (and so far, largely ineffective) measures and proposals to address the issue, both tax-related and otherwise. This article provides an overview of the most recent tax changes already enacted or currently under consideration.

Catalonia’s new transfer tax rules

Increased transfer tax

Effective as of 27 June 2025, Catalonia has introduced a 20 per cent transfer tax on the acquisition of dwellings by ‘large holders’ of residential properties. For reference, the standard tax rates when dealing with residential property range from ten per cent to 13 per cent, depending on the purchase price, as follows:

• ten per cent on amounts up to €600,000;
• 11 per cent on amounts between €600,000.01 and €900,000;
• 12 per cent on amounts between €900,000.01 and €1,500,000; and
• 13 per cent on amounts above €1,500,000.

A ‘large holder’ of residential property is defined as any person or entity that meets at least one of the following criteria:

• they own five or more dwellings in Catalonian municipalities that are declared to be in ‘high demand’ (these areas cover 90 per cent of the population);
• they own more than ten dwellings in Catalonia; or
• they own dwellings with a total built area exceeding 1,500 m² in the region.

The 20 per cent rate also applies to the purchase of entire residential buildings, regardless of the buyer, with limited exceptions (eg, when an individual purchases a building in order to use it as a place of residence for themselves and their close relatives). The law includes anti-fragmentation measures, namely acquiring the building in phases does not prevent the 20 per cent rate from applying once the entire structure has been acquired.

The interaction with value-added tax (VAT)

This increased transfer tax only applies when the transfer is not subject to VAT (and not exempt from it). In VAT-applicable cases, VAT takes precedence, and Catalonia lacks the authority to modify VAT rules. Typically, this means that transfers made by entrepreneurs of new dwellings or dwellings that have undergone renovation works within the meaning of the EU VAT Directive (2006/112/EC) continue to be taxed at the usual ten per cent VAT rate plus 1.5 per cent stamp duty. VAT also applies to the second and subsequent transfers of dwellings made by entrepreneurs when the VAT exemption is waived (only possible as a general rule when the acquirer intends to use the dwelling for an activity that entitles them to the recovery of input VAT, such as accommodation with ancillary services, but not the mere renting out of the dwelling), but, in this case, the Catalonian government has approved an increased 3.5% stamp duty (the highest in all the country), which also applies to any transfer where the VAT exemption is waived (ie, not only dwellings). Therefore, this change only applies to transfers made by taxpayers who are not engaged in an active business or trade, to transfers of old dwellings where the VAT exemption is not (or cannot) be waived or to transfers of dwellings within a ‘going concern’ for VAT purposes.

The repeal of purchase incentives for redevelopment

Also, in Catalonia, the former 70 per cent tax rebate for companies buying dwellings to refurbish and resell has been repealed with effect as of 27 March 2025. These transactions will now be taxed at ordinary transfer tax rates (ten to 13 per cent).

Proposed nationwide tax measures

While Catalonia leads in terms of the number of enacted tax-related changes, a nationwide draft bill introduced by the ruling Socialist party could bring far-reaching consequences if approved.

A 100 per cent tax on non-EU buyers of real estate

The most controversial proposal is a new tax equal to 100 per cent of the purchase price for real estate acquired by non-EU residents. This is not a misprint, the buyer would effectively pay double. The tax mimics the mechanics of the transfer tax, as follows:

• it only applies to transactions already subject to the transfer tax;
• the amount of transfer tax paid can be deducted from this new tax (meaning the total burden is capped at 100 per cent of the purchase price); and
• the rest of the tax rules replicate the transfer tax provisions.

This proposal raises serious constitutional and EU law concerns, especially regarding:

• confiscatory taxation, which is explicitly prohibited by the Spanish Constitution;
• equal treatment, as the measure targets buyers based solely on residency; and
• the lack of clarity regarding entities from the European Economic Area (EEA) (which usually receive EU-equivalent treatment).

Moreover, the proposal overlooks common structures, such as EU-based companies ultimately owned by non-EU individuals (which would apparently not trigger the tax). The country, of course, has general anti-abuse provisions, but it has always been fairly common to use companies (especially Spanish companies) to purchase real estate in Spain. Therefore, the tax authorities would have a hard time proving that this structure was put in place with the intention of avoiding tax. Also troubling is the application of the tax to entrepreneurs selling real estate outside the scope of the VAT rules, such as in regard to transfers of going concerns or concerning second-hand dwellings where the VAT exemption cannot be waived.

VAT on tourist apartment rentals

The draft also proposes applying a 21 per cent VAT to short-term tourist rentals, up from the reduced ten per cent rate applied to hotel stays. While potentially more viable than the previous measure, this proposal creates inconsistencies, which could be found to be in breach of EU law, as follows:

• hotels and similar services benefit from a ten per cent VAT rate, so taxing apartment stays more heavily appears arbitrary; and
• the new rule could affect any rental of furnished properties offering hotel-like services (eg, food, laundry or cleaning), potentially catching rural accommodation or small family-run hotels unintentionally.

Changes to personal income tax and corporate income tax

Currently, taxpayers are imputed deemed income of two per cent of the cadastral value (or 1.1 per cent if updated in the last ten years) for urban properties not rented and not used as primary residences (unless they are plots of land without any constructions on them). The draft introduces a progressive scale, as follows:

• 1.1 per cent for cadastral values < €100,000;
• 1.5 per cent for cadastral values from €100,000 to €500,000;
• two per cent for cadastral values from €500,000 to €1m; and
• three per cent for cadastral values > €1m.

This change applies to all urban properties, not just dwellings, thus affecting parking spaces and offices, etc. The stated rationale is to incentivise renting, but its broad scope might suggest a more revenue-driven motive.

The minimum deemed income in case of leases to close relatives is also amended to reflect the aforementioned changes. For context, in Spain, when a taxpayer rents a property to a close relative (up to the third degree of kinship), the net income obtained from this lease cannot be lower than the income the taxpayer would have obtained if the property had been available for their personal enjoyment.

The draft significantly expands the range of situations eligible for tax reductions on rental income from long-term leases. The number of qualifying scenarios would increase from four to 13 under the proposed bill, reflecting a more nuanced approach by the legislature.

The draft also introduces further unfavourable tax changes for Spanish real estate investment trusts (REITs) (Sociedad Cotizada Anónima de Inversión en el Mercado Inmobiliario or SOCIMIs). Following the 2021 reform, which imposed a 15 per cent tax on retained earnings not distributed as dividends, the new proposal raises this rate to 25 per cent, but only for income derived from long-term residential rentals.

It remains uncertain whether these proposals will pass into law. The draft has already lost momentum amid political scandals and shifting priorities, and the threat of early elections looms in the air, with these potentially taking place by autumn, an event that could result in a new parliamentary makeup that sets this proposal aside entirely.

For now, the prudent course is to monitor developments closely and prepare for potential implementation of the proposed reforms.

Note: as non-native English speakers, we have used AI-based language tools to assist in improving the grammar, clarity and overall expression of this article. While the content and analysis are entirely our own, these tools have helped ensure the language meets the required standard.