In more detail

Spain's proposed 100% property Transfer Tax on non-EU residents

Overview of the proposed tax

• Scope: The tax would apply to transactions involving the transfer for consideration of Spanish real estate, as well as the creation or transfer of real rights over such property, when the acquirer is an individual or entity not resident in the EU.
• Exclusions: The tax would not apply to transfers of properties subject to and not exempt from value-added tax (VAT) (i.e., most new-build purchases from developers would be excluded).
• Tax base: The taxable base would generally be the cadastral reference value set by the Spanish Cadastre, or, if higher, the price declared or agreed by the parties. Only charges that reduce the property's value would be deductible; debts (even if secured by mortgage) would not be deductible.
• Tax rate: The tax would be levied at a flat rate of 100% on the taxable base.
• Credit for existing Transfer Tax: Any regional Transfer Tax paid would be deductible from the new complementary tax liability.
• Tax administration: The tax would be managed and collected by the Spanish state, not the autonomous regions.

Legislative process and current status

This measure is, at present, a mere legislative proposal at the initial stage of Spain's parliamentary process. Given the controversial nature of this proposal, we anticipate significant debate and potential amendments during the parliamentary process.

Legal and constitutional concerns

There are serious doubts regarding the compatibility of this tax with EU law, particularly the principle of free movement of capital. The European Court of Justice has repeatedly ruled against Spain and other member states for discriminatory tax measures targeting non-residents, including those from outside the EU. The proposal also faces potential challenges under Spanish constitutional law, as a 100% tax rate, even with a deduction for the existing regional Transfer Tax, could be considered confiscatory and violate constitutional principles of proportionality and non-confiscation.

Conclusions and strategic considerations

Based on our analysis of EU jurisprudence and Spanish constitutional law, we consider this proposal is unlikely to survive legal scrutiny in its current form. The measure raises substantial legal and constitutional concerns and would likely face immediate challenge in both Spanish and European courts if enacted.

We will continue to monitor developments and advise clients as the situation evolves.

Catalonia's new real estate tax regime

The government of Catalonia has approved a sweeping reform of real estate framework through Decree Law 5/2025, introducing significant increases to both the Transfer Tax (TT) and stamp duty. These changes, effective from 27 June 2025, are expected to have a substantial impact, reshaping the investment landscape across the region.

Key measures and their impact

Progressive TT rates

One of the most notable changes is the introduction of progressive tax brackets for the TT:

• Up to EUR 600,000: 10%.
• EUR 600,000 to EUR 900,000: 11%.
• EUR 900,000 to EUR 1.5 million: 12%.
• Above EUR 1.5 million: 13%.

This positions Catalonia well above the national average (7%).

20% TT for large property holders 

Entities classified as "large property holders" will face a flat 20% TT rate, regardless of transaction value. This measure is designed to discourage speculative activity and promote housing availability.

Definition of large property holders

• Own five or more residential properties located in high-demand areas in Catalonia; 
• Own more than 10 residential properties across the region; or
• Hold over 1,500 square meters of residential floor space.

Special considerations for co-ownership and usufruct 

While the law is silent on co-ownership situations, interpretative guidance issued by a Barcelona court — while not binding for the Catalan tax authorities — suggest the following:

• Only ownership or usufruct exceeding 50% counts toward the threshold.
• Bare ownership is excluded from the calculation.

Entire building purchases also affected

The 20% TT applies to full-building acquisitions except in the following circumstances:

• The buyer is a natural person.
• The building has no more than four units.
• All units are intended as primary residences for the buyer and their family.

Elimination of rehabilitation incentives 

The 70% TT rebate for real estate companies rehabilitating and reselling within three years has been abolished, removing a key incentive for urban renewal.

Stamp duty increase for corporate transactions 

Stamp duty on property transfers between companies rises from 2.5% to 3.5% (when VAT exemption is waived), affecting transactions involving hotels, offices and commercial assets.

In contrast, the general stamp duty rate in other regions is typically 1.5%.

Conclusions and strategic considerations

These reforms reflect Catalonia's broader policy goals: curbing speculation, promoting housing access and increasing tax progressivity. However, they also introduce substantial cost implications for institutional investors, developers and corporate acquirers. At Baker McKenzie, we are already advising clients on how to navigate this new landscape.

In conclusion, Spain is entering a new era of real estate taxation shaped by significant legislative initiatives at both the national and regional levels. The proposed state-level tax targeting non-EU investors signals a shift toward protectionist housing policy, while Catalonia's sweeping reforms reflect a clear intent to curb speculation and promote housing access through fiscal pressure.

While these measures align with broader social objectives, they also introduce significant legal uncertainties and financial burdens. Stakeholders should closely monitor the legislative process and prepare for potential legal challenges, especially at the EU level.

*****

Nicolas Osorio, Junior Associate, contributed to this legal update.