Home » EU demands Spain end discriminatory tax on non-resident EU property owners

spanish property taxes

The European Commission has issued a formal demand for Spain to end its practice of taxing non-resident EU property owners differently from Spanish residents—a move that could bring significant relief to thousands of foreign homeowners in Spain.

Brussels challenges Spain’s tax rules

At the heart of the dispute is Spain’s annual tax on properties owned by non-residents that are not rented out or generating income. While Spanish residents are exempt from this tax on homes they use as their main residence, non-residents—including EU citizens—are required to pay between 19% and 24% on up to 2% of the property’s cadastral (rateable) value, regardless of whether they earn any rental income from the property.

The European Commission considers this practice discriminatory, arguing that it violates EU principles on the free movement of workers and capital. In a letter of formal notice—the first step in an infringement procedure—the Commission has given Spain two months to amend its legislation or justify its position. If Spain fails to act, the case could be referred to the Court of Justice of the European Union (CJEU), potentially forcing a change in Spanish tax law.

Implications for foreign homeowners

This legal challenge has far-reaching implications for EU citizens who own second homes or holiday properties in Spain but do not reside there full-time. Should the European Commission prevail, Spain may be required to align its tax treatment of non-resident EU property owners with that of residents, possibly resulting in lower tax burdens for many foreign owners.

Context: Broader housing and tax reforms

The timing of this challenge is notable, as Spain is also debating higher taxes on vacant and underused properties to address housing shortages. The government has recently proposed even more drastic measures for non-EU buyers, including a 100% property tax and an outright ban on non-resident, non-EU property purchases—though these do not affect EU citizens.

What happens next?

Spain now has two months to respond to the European Commission’s demands. If it does not comply, the case will proceed to the European Court of Justice, where a ruling against Spain would likely force a revision of its tax rules for non-resident EU property owners.

“The EU has demanded that the Spanish authorities put an end to this taxation, considering it discriminatory and stating that this treatment affects the free movement of workers and capital.” (source)

Conclusion

This case is one to watch closely for any EU citizen who owns property in Spain but lives elsewhere. The outcome could set a precedent for how EU countries treat non-resident property owners and may significantly impact the financial obligations of thousands of homeowners across Spain.

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