The Spanish Socialist Workers' Party (PSOE) has introduced a new tax proposal targeting non-residents purchasing real estate in Spain, generating considerable uncertainty and concern among real estate professionals and fiscal experts. Several legal firms have expressed their apprehensions, citing the vague language in the proposal regarding both the applicability and the types of properties involved. The document suggests that the tax could affect all property categories, including commercial and industrial assets, potentially impacting unrelated real estate investments.

As part of the legislative initiative to promote affordable housing rentals, the plan outlines the establishment of a supplementary state tax on the transfer of real estate to non-EU residents. This levy would cover "onerous property transfers within Spanish territory" and "the establishment and transfer of real rights over them," impacting individuals who are not EU residents. The intention behind this measure is to double the initial cost of the property by imposing a 100% surcharge on its value.

José Suárez, a tax partner at Pérez-Llorca, pointed out that the proposal lacks clarity on what constitutes real estate and whether the levy applies to only one type of property. He references a Latin adage: "Where the law makes no distinction, neither should we," implying that the tax should apply to all property types — residential, commercial, or industrial — regardless of their location in stress zones.

The tax will impact transactions subject to the Property Transfer Tax (ITP), typically affecting second-hand properties in subsequent transactions. New properties, which incur Value Added Tax (VAT), are not affected. Experts note that if a transfer occurs between businesses, it would be subject to VAT and not the ITP, thereby exempting it from the new tax in most instances. For this exemption, the business would need to waive VAT and later reclaim it.

Raquel Jurado from the Registry of Fiscal Economists Advisors (REAF) reiterated that selling any property, whether a residence, commercial space, or land, always incurs VAT or the ITP. In the latter case, it would be subject to the supplementary tax. The legislative draft, she continued, mirrors the structure of the ITP: "Transactions subject to the ITP will also need to pay the supplementary tax," she stated.

She provides the example of an "autonomous economic unit" like a supermarket or gym. "When a business is sold as a whole, the transaction isn't subject to VAT, but if it includes real estate, it would be taxed under the ITP and the supplementary tax," she explains.

Government sources acknowledge this interpretation stem from the proposal's wording but mention the need for further negotiation in Congress, suggesting potential changes to the tax's application.

Javier Seijo, a partner at EY Abogados responsible for real estate taxation, highlights that the proposal impacts all property types and believes it conflicts with VAT, meaning transactions subject to VAT wouldn't apply to the supplementary tax.

"The problem arises with asset transfers where the distinction between VAT and the new tax is complex, or when real estate is transferred through a corporation," Seijo notes, adding that this complication could occur when "the corporation is purchased instead of the asset, raising questions about whether the use of a corporation might be seen as manipulative by tax authorities." He warns, "We hope the supplementary tax doesn't come into effect, as it would only increase legal disputes, infringe upon community law, oppose capital movement freedom, and be confiscatory."

From a technical standpoint, Pelayo Oraá of KPMG Abogados notes that the proposed tax is not limited to residential properties but extends to other real estate assets like offices and commercial properties. However, he adds, these transactions are less likely to be taxed under the supplementary measure since these assets are typically acquired through Spanish corporations, thus not directly by foreigners. Additionally, if acquired by non-EU residents, VAT applies, which is expected to be incompatible with the new tax.

A partner from an international law firm concurs that the use of the term real estate in the proposal is misleading, as it also encompasses real rights associated with these properties.

An attorney from another significant international law firm argues that the PSOE's proposal should exclude not only EU residents but also those from the European Economic Area (EEA), including non-EU countries like Norway, Iceland, or Liechtenstein. She explains that the EEA treaty offers the same freedoms as the EU, meaning discrimination against EEA residents is not permissible.