Treasury reverses its tax axe on foreigners investing in Spanish real estate

I am pleased to inform you about recent news that positively affects foreigners investing in property in Spain. The Directorate General of Taxes has reconsidered its position with regard to wealth and wealth taxes for non-residents who have investments in the Spanish property market, either directly (through the purchase of assets) or indirectly (through shareholdings in companies).

According to the newspaper Expansión, the Directorate General of Taxes has clarified that non-residents who invest indirectly in the Spanish real estate sector will not be obliged to pay these taxes. This is very positive news for non-resident investors, as it provides certainty as to the exemption from Wealth Tax and Major Wealth Tax.

A concrete case illustrating this change concerns a company based in Mexico. The Directorate General for Taxation has determined that, in this case, the conditions for Wealth Tax to apply are not met, as the company’s shares are not considered to be located in Spanish territory. The same applies to the Large Fortune Tax.

This tax change occurred at the end of last year and generated concern in the expert community. The modification was included in Law 38/2022, published in the Official State Gazette on 28 December 2022 and in force since 29 December of that year. This amendment broadened the taxable base of Wealth Tax to include non-residents holding property in Spain, either directly or indirectly through companies.

Experts expressed concern about the lack of clarity in the wording of the regulation and the implications it could have for foreign investors. Some argued that the amendment was too broad and affected a variety of situations without distinguishing between property used for personal purposes and investment property.

In short, this tax revision represents a relief for non-resident investors participating in the Spanish property market indirectly through companies. The clarification by the Directorate General of Taxation provides certainty and clarity as to the exemption from Wealth Tax and Major Wealth Tax in these cases. This news will surely be welcomed by those interested in investing in Spain’s attractive real estate market.