END TO DISCRIMINATORY TAX
EU DEMANDS SPAIN TO END DISCRIMINATORY TAX ON RESIDENT EU PROPERTY OWNERS
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.
SOURCE SPANISH PROPERTY INSIGHT
EU Demands Spain End Discriminatory Tax on Non-Resident EU Property Owners
The European Commission has formally requested that Spain amend its current tax legislation, which imposes higher taxes on non-resident EU property owners compared to Spanish residents. This move could bring long-awaited relief to thousands of EU citizens who own second homes in Spain.
Brussels Challenges Unequal Taxation
At the centre of the issue is Spain’s tax on properties owned by non-residents that are not rented out. While Spanish residents are exempt from this tax on their primary homes, non-resident owners—including EU citizens—are taxed at rates ranging from 19% to 24% on up to 2% of the property’s cadastral (rateable) value. Crucially, this applies even when the property does not generate any rental income.
The European Commission views this as a violation of EU principles regarding the free movement of workers and capital. A formal letter of notice—marking the first step in EU infringement proceedings—has been sent to Spain. The country has two months to justify or amend its legislation. Failure to act could see the matter escalated to the Court of Justice of the European Union (CJEU), potentially forcing a change in Spanish tax law.
What This Means for Foreign Property Owners
Should Spain be required to amend its legislation, non-resident EU citizens who own property in Spain could benefit from a more equitable tax regime. This would likely reduce the annual tax burden on thousands of second-home and holiday property owners who reside elsewhere in the EU.
Wider Context: Housing and Tax Reforms in Spain
The timing of the Commission’s challenge coincides with broader discussions in Spain around housing and tax reform. Measures under consideration include increased taxes on vacant or underused properties and proposals aimed at curbing foreign investment in real estate. Notably, there have been suggestions of a 100% property tax and even bans on property purchases by non-resident, non-EU buyers—though these would not apply to EU citizens.
Next Steps
Spain now has two months to respond to the European Commission’s demands. If no satisfactory action is taken, the issue could be taken to the European Court of Justice. A ruling against Spain would almost certainly result in changes to the country’s tax treatment of non-resident EU property owners.
As the Commission put it, "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."
Conclusion
This is a key case for EU citizens who own property in Spain but live elsewhere. The outcome may establish a vital precedent and lead to fairer tax treatment across the EU for non-resident homeowners.
Source: Spanish Property Insight
