What we know as Spain plans 100% tax on property bought by Britons

Britons looking to buy a property in Spain could be hit with a major tax worth the value of the home they are looking to buy.

The Spanish government announced on Monday it wants to introduce a tax that would be worth up to 100% of the value of properties being bought by non-EU citizens who are not legally Spanish residents.

Spanish prime minister Pedro Sanchez said the proposal was aimed at helping tackle Spain’s housing crisis, which has left local people being priced out of the property market by foreign buyers.

It comes after a year of protests in many Spanish cities against tourists – many of whom are from the UK – who locals accuse of driving up prices and buying homes that are often left empty.

Yahoo News UK looks at what the 100% tax proposal means for Britons already dealing with other impacts of Brexit.

What is Spain’s new property tax proposal?

Speaking at an economic forum in Madrid, Sanchez said his government is planning a tax of up to 100% on properties bought by non-EU residents, meaning buyers could pay taxes worth the full price of a home.

He said: “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, many of them British, bought 27,000 properties in Spain in 2023 and said they did so “not to live in” but “to make money from them”. He said: “There are too many Airbnbs and not enough homes.”

Sanchez did not reveal how the new plan would work, or when his minority government would submit it to Spain’s parliament for approval, where he has often failed to pass legislation.

The plans also include other measures, such as a tax exemption for landlords providing affordable housing and tougher regulations and taxes on tourist apartments.

He said: “It isn’t fair that those who have three, four or five apartments as short-term rentals pay less tax than hotels.”

What are the current property tax rules in Spain?

Currently, house buyers expect to spend between 8% and 11.5% of the property price on taxes when acquiring a home in Spain.

Property purchases in Spain are subject to a 10% tax on new homes (as well as 1.2% of the purchase price on stamp duty) and a 7% tax on older ones.

There were more than 280,000 Britons living in Spain in 2023, according to the El Padron population register, when more than 12,000 property purchases involved a British buyer.

The post-Brexit impacts on UK citizens

The proposal would only apply to residents in non-EU and is one of many ways in which Britons’ freedom to travel, live work or study in Europe has been impacted by Brexit.

Travel

While UK citizens no longer need to apply for a short-term visit to the EU, they can no longer use the border control lane for EU citizens, although there are exceptions for family members of those with EU passports.

They must also have their passports stamped, and EU border officials can ask to see supporting documents such as proof of accommodation and finances or a round-trip ticket.

The EU is also planning to introduce two separate – but interconnected – schemes that will affect non-EU travellers. One is the EU Entry/Exit System (EES), which is an automated system for registering travellers from the UK and other non-EU countries each time they cross an EU external border.

The introduction of this has been delayed for a number of months – it was originally expected to be introduced in autumn 2024, but a timeframe has yet to be confirmed.

British travellers will also eventually need to apply for an ETIAS (European Travel Information and Authorisation System) to enter 30 European countries. Once approved, this will be linked to their passport for multiple entries to the EU until it expires after three years.

Working and living in the EU

Brexit ended Britons’ EU citizenship and free movement rights.

Previously, UK citizens could have lived or worked in any EU member country without the need for a visa.

They and their family members were able to claim the right to reside in a member nation as a worker or job seeker.

While British citizens don’t require a visa to stay in an EU country for up to 90 days in a given 180-day period, this only applies to leisure visits.

After 90 days, they will need a visa to stay longer and to obtain a job or study. In some EU countries, they must be sponsored by an employer to be allowed to stay, while other nations will grant a temporary visa to let them find a job.

Studying

Since Brexit, the opportunities for UK citizens who wish to study in the EU have become more limited, with British students likely needing a visa if they wish to study in an EU country.

If doing part of their UK course in the EU, students should check the visa requirements for the country they have chosen.

The UK is not part of the Erasmus+ programme but it has launched an alternative, the Turing scheme, which does provide funding for students who want to study or work abroad.

For those UK students doing their entire degree in the EU, if they were already living there by 31 December 2020 then their fees should be the same as those charged to citizens of the host nation.

However, for those moving to the EU to start a course any time after 1 January 2021, they will have to pay different fees.

UK citizens who are studying in the Republic of Ireland will be covered by Common Travel Area (CTA) arrangements, meaning they do not need a visa.

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