The Impact of Spain’s Possible 100% Property Tax Hike on Non-EU Residents: Potential Impact for British Expats and the Proposition of Cyprus

Spain is experiencing a housing crisis. Shortages and rising housing prices are believed to be caused by foreign buyers and mass tourism hence recently large protests were held against tourists in several cities such as Barcelona.

A. The 100% immoveable property tax in Spain

Spain’s Prime Minister Pedro Sanchez recently announced several measures to tackle the housing crisis, including a 100 % tax on immovable properties bought by foreigners.

If the proposal passes the tax will be imposed on individuals who are not citizens or residents of the European Union and frequently use the properties for vacations or investments.

So far Britons are at the top of the list of foreign property purchasers in Spain. Reports suggest that if the measures are approved foreign property buyers including Britons would consider buying properties somewhere else like Cyprus where property taxes are insignificant.

B. The inheritance tax in Spain and other EU jurisdictions

Another very important point, which is often overlooked, is the fact that properties in Spain are also subject to inheritance tax. Meaning that a potential owner, non-EU or otherwise, will be subject to inheritance tax in Spain if wishing to pass on their property to a family. An inheritance tax is also applicable in other EU jurisdictions. Cyprus on the other hand has no inheritance tax whatsoever, it is possible to transfer to a spouse or to any direct descendant properties in Cyprus inter vivos by donation without any tax or by death again without inheritance tax.

Cyprus is indeed a very interesting jurisdiction to consider when buying properties.

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