Residency for non-EU buyers of €500K homes

After much debate, Spain is set to introduce a new law which will grant permanent residency permits to non-EU nationals who buy a property in Spain worth €500,000, experts say.

Residency for non-EU buyers of €500K homes
The Spanish government set the initial property investment hurdle at €160,000, a figure many believed made Spain look cheap. Photo:Frank Kovalchek

The news is likely to go down well with affluent Russian and Chinese property buyers, who are already the third and eighth biggest foreign homeowners in Spain.

“Obtaining the right visa permits and documents for Spanish residency in China and Russia is known to give anyone a bureaucratic headache,” Alex Vaughan, partner at luxury Barcelona-based estate agency Lucas Fox, told The Local.

“Although the new law hasn't been passed yet, it’s likely to make it a lot more straightforward to obtain a permanent residency permit, rather than the temporary one that non-EU nationals have found so difficult to get up to now.”

Back in November, the Spanish government set the property investment hurdle at €160,000, a figure many believed made Spain look cheap when compared to the €400,000 sum demanded by Portugal and Ireland for non-EU residency permits.

They have since been drafting new legislation which, according to inside sources, will set the bar at half a million euros for prospective buyers looking to gain official Spanish residency.

“The only strings attached are, to our knowledge, no criminal record, proof of your ability to support yourself financially and private health insurance,” says Vaughan.

Under the draft new law, foreigners who obtain residency in this way won't be able to work in Spain, or access the country's health and social security systems, sources from Spain's Ministry of Economy and Competitiveness told El País newspaper on June 3rd.

Approximately 90 percent of Lucas Fox sales come from foreign buyers, 40 percent of whom are either Russian or Chinese.

“We've had increasing interest from prospective homeowners from South East Asia, but also from Australia, the US, South Africa.

“People from overseas are attracted by the quality of life over here, and Spain has far better infrastructure, health care and transport than countries like Cyprus and Portugal that have introduced similar legislation.”

Vaughan told The Local that once the new law is put in place in June, it could only be beneficial for Spain’s ailing property market, despite the fact that demand for luxury homes like the ones Lucas Fox sells has continued growing throughout the crisis.

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More than half of tax address changes in Spain are fake: survey

Sixty-eight percent of Spanish tax advisors consider that an increasing number of people are ditching their Spanish tax residence for one overseas or for a different Spanish region in order to get more favourable tax conditions, a new report has found. 

More than half of tax address changes in Spain are fake: survey
Madrid has some of the most favourable tax conditions in all of Spain. Photo: Robert Tjalondo/Unsplash

These are the findings of a report by Spain’s Registry of Tax Advisors and Economists (Reaf), titled “The opinion of tax adviser economists on our tax system”. 

Fifty-five percent of the 900 Spanish tax advisors interviewed said that these changes of tax residence to another country or region were primarily only theoretical, so only on paper without physically moving.

Sixty-eight percent of Spanish tax advisors considered the number of fiscal address changes were on the up in Spain and 57 percent said the number of queries they had personally received relating to tax residence changes had also increased.

Anyone who spends more than 183 days in Spain during a calendar year is considered a Spanish tax resident (find out more here).

Just over 87 percent of respondents estimated that the differences in tax regulations between regions are the main cause for people changing their fiscal address, whether they actually do move or it’s just on paper.

Sixty-two percent of the tax advisors that spoke to Reaf also consider that the stark differences in the level of tax pressure between the regions cannot be maintained.

“When tax differences are established by the autonomous communities, one should not lose sight of the fact that they can motivate these changes of residence.” Reaf President Agustín Fernández said regarding the survey.

The most obvious example of these big tax differences between Spain’s 17 regions is inheritance tax, which can be very high in some regions such as Asturias and Castilla y León and almost non-existent in others such as Madrid.

EXPLAINED: How choosing the right region in Spain can save you thousands in inheritance tax

Up to 86.5 percent of the surveyed tax advisors also considered that Spain’s Tax Agency – Hacienda – hasn’t adapted to changes to trends involving business and taxpayers and 96.1 percent said that Spain’s State Tax Administration Agency (Aeat) prioritised tax collection over tax justice.

Overall, these Spanish tax professionals were critical of Spain’s tax system, believing it hasn’t improved or adapted enough over time. 

Almost half of them believe Spain’s tax management system has been tightened whereas only 27.8 percent believe tax inspections have improved. There’s also a division of opinions among the experts over whether tax matters should be handled by Spain’s central tax body or together with the regions as it is currently. 

What they all agree on is the lack of clarity of Spain’s tax rules, 95 percent of respondents state that the wording of official Spanish tax regulations is deficient.

“If there is a change of real address and you go to live in Madrid, perfect, what cannot happen is that you are registered in Madrid to have the most favourable taxation and then you are enjoying the sun of our region every day,” Valencian Tax Agency general director Sonia Díaz said in 2019 when this trend became more commonplace. 

It’s worth noting that with Personal Income Tax (IRPF), the region where you’ve stayed a greater number of days in a calendar year is considered your habitual residence, whilst when it comes to inheritance tax the last five years are considered.