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EXPLAINED: How Spain has found a way to officially axe its golden visa

After failing in its first attempt to pass legislation that would officially end the golden visa for wealthy foreigners, Spain's government has now found a loophole they believe will work to cancel the controversial scheme once and for all.

Published: 24 July 2024 13:43 CEST
Updated: 27 July 2024 07:47 CEST

EXPLAINED: How Spain has found a way to officially axe its golden visa

Tourists look at the window of a real estate agency in the town of Mahon on the Balearic island of Menorca on May 30, 2024. (Photo by JAIME REINA / AFP)

It’s been more than three months since Pedro Sánchez announced that his government would get rid of the golden visa for non-EU nationals, as part of plans to address the country’s housing crisis.

However, the left-wing Spanish government has been unable to find the parliamentary support needed for the scheme to be legally revoked.

Spanish Housing Minister Isabel Rodríguez had initially planned to include an amendment in the country’s new land law, known as the Ley del Suelo in Spanish, but it was withdrawn from the agenda in Congress as it did not have the necessary support to move forward.

Since then, Rodríguez’s ministry has been looking for ways to ‘slip in’ or attach the golden visa amendment to another law which is likely to receive a majority vote from MPs.

In fact, there has not really been any criticism among Spain’s opposition parties with regard to ending the golden visa scheme since Sánchez first announced the move in April, but the Socialists’ weakened position in Congress is resulting in them having problems passing major laws, ones which the golden visa elimination could be attached to.

For example, on Wednesday July 23rd there was a so-called ‘supper session’ in the Spanish Congress with many legislative changes debated and voted on, and only a few of Sánchez’s proposals received the green light.

However, a new report by Spain’s leading daily El País suggests that the PSOE has now found a loophole that this time will work, they believe.

Spain’s left-wing coalition government will reportedly take advantage of the processing of the organic law on judicial efficiency measures and consumer protection to introduce, via amendment, the elimination of the golden visa.

The amendment also slips in giving communities of owners the right to decide whether or not to allow short-term tourism apartments in their residential buildings.

It’s not unusual for Spanish ministers to add an enmienda (amendment) to a bill that has nothing or little to do with the crux of the law being processed.

Only last May, Pedro Sánchez’s party added an amendment which eased the requirements for decrees to be approved into the Gender Parity Law, which focuses more on equal pay and work rights between men and women.

The other standout news from El País’ report, which has had access to the actual amendment text, are the government’s plans to scrap all the different types of golden visa options.

Not just the €500,000 property purchase option as initially thought, all of them, including the investment options.

Spain’s ruling Socialists will present the golden visa amendment attached to the Judicial Efficiency Law in the Lower House on Wednesday July 24th.

Pressure has recently been growing within Spain’s government for the golden visa scheme to well and truly be cancelled.

Only last week, an MP for Spain’s junior government partner Sumar urged Pedro Sánchez to “keep his word” and “urgently” repeal the golden visa scheme, 100 days after the PM made the initial announcement.

ANALYSIS: Is Spain’s decision to axe golden visa about housing or politics?

Member comments

Anonymous - 24 July 2024 at 18:12 CEST

Bien hecho…

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Navigating Spain's real estate market: A guide for American homebuyers

Buying a residential property in Spain can be an exciting yet complex endeavour, especially for American buyers unfamiliar with the intricacies of the Spanish real estate system.

With varying regulations at the state, regional, and local levels, it is crucial to be well-informed and well-prepared.

In this article, Maryem Essadik, immigration lawyer and head of English-speaking international law firm Marfour, offers US nationals a breakdown of the key considerations when buying a Spanish property.

Legal Complexities

Spain’s legal framework for real estate transactions is multifaceted, involving regulations that differ significantly between the national, regional, and local levels. Therefore, engaging specialized real estate lawyers is highly advisable.

1. State, Regional, and Local Regulations: The Spanish legal system is characterized by its decentralized nature. Each autonomous community in Spain can have distinct laws affecting real estates and property transactions. For example, while some regions may establish restrictions for renting out properties (ie. Limitations or prohibitions on carrying out short-rental activities, limitations on long-term rental prices etc.), others might have significantly varying taxes and fees associated with property purchases, and others can also count with a singular regional Civil Code that regulates in a particular manner important aspects such as the initial down payment contract (“Arras” in Spanish) when buying a property. Municipal regulations can also considerably impact property use and renovations.

2. Legal Representation: A lawyer with expertise in Spanish real estate law can navigate these complexities, ensuring compliance with all applicable regulations. They can conduct due diligence, verify property titles, and check for any encumbrances or legal issues that could affect the purchase. Legal representation is not just a formality but a necessity in Spain to avoid potential pitfalls.

3. Immigration legal advice: In connection with the property you want to buy in Spain you should receive the proper immigration law advice. Nationality and Immigration regulations in Spain are a complex but at the same time exciting field to navigate to find the best solution that will be matching your concrete case and circumstances (i.e: Digital Nomad Visas, Non Lucrative visas etc.)

LISTED: The visa options Americans can apply for to live in Spain

Fiscal Considerations

Taxation is another critical area that requires careful attention. Spain’s tax system includes various taxes that can impact the overall cost and benefits of owning a property.

1. Tax Residency: Determining your tax residency status is essential as it influences the taxes you are liable to pay. If you spend more than 183 days in Spain in a calendar year, you are considered a tax resident. You can also qualify as tax resident in Spain if having in this country the centre of your economic interests. Tax residents are subject to Spanish income tax on their worldwide income, while non-residents are taxed only on income generated in Spain.

2. Income Tax and Wealth Tax: Spain imposes income tax (IRPF) and wealth tax (Impuesto sobre el Patrimonio) differently across its autonomous communities. The rates and allowances can vary, so understanding the specific regulations in the region where you plan to buy is crucial. For instance, some regions might have higher exemptions for wealth tax, impacting the overall cost of owning high-value properties.

3. Rental Income: If you plan to rent out your property, you need to be aware of the taxation rules on rental income. US tax residents are currently taxed for their rental incomes in Spain at a 24 percent flat rate on rental income (not being allowed to deduct any expense), whereas Spanish tax residents include rental income in their general taxable income (with different expenses being tax deductible), which could be taxed at progressive rates. Counting with the appropriate assistance of tax lawyers specialized in American clients and with a full knowledge of the US-Spain Tax Treaty can considerably help you to improve your tax bill.

4. Special Tax Expats Regime: Implemented at the time that David Beckham joined Real Madrid (and known because of that as “Beckham Regime”), that regime may allow you enjoying the pros of being a tax resident in Spain, by living in this country exceeding 183 days per year, but taking advantage of a 24% flat rate and only making taxable in Spain labour incomes together with other incomes generated in Spain but not being taxable in Spain those sourced abroad. This tax regime has a maximum total 6 years duration and those who are eligible for it they also avoid filing Wealth Tax in Spain for their worldwide wealth.

To properly apply for it, it is always recommendable carrying out a previous tax planning and analysis with specialized Tax Lawyers before buying your property and moving to Spain.

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Property Inspections

A thorough technical inspection by a qualified architect is advisable to ensure the property meets all regulatory standards and is free from structural defects.

1. Construction Defects: Architects can identify potential issues such as structural integrity, water damage, and compliance with building codes. This is especially important for older properties or those that have undergone renovations.

2. Urban Planning Compliance: The inspection should also verify that the property complies with local urban planning regulations. Non-compliance can result in significant fines or even demolition orders.

Buyer’s Agents

Unlike real estate agents who typically represent the seller and defend his interests, buyer’s agents work in the interest of the buyer, offering numerous advantages.

1. Local Market Knowledge: Buyer’s agents are well-versed in the local market conditions and can provide valuable insights into different neighbourhoods, school districts, community amenities etc. This knowledge helps in identifying properties that best match your preferences and needs.

2. Fair Pricing: Buyer’s agents can help negotiate better prices. They are familiar with the local market rates and can prevent the common practice of overpricing properties for foreign buyers.

3. Due Diligence: By conducting thorough market analyses and property evaluations, buyer’s agents can ensure that you make an informed decision. They also handle the negotiation process, striving to secure the best possible deal on your behalf.

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Financial Advice

Securing favourable financial terms can result in substantial savings, making it essential to seek expert financial advice.

1. Currency Exchange: For American buyers, currency exchange rates can significantly impact the cost of purchasing a property. Working with a reputable currency exchange provider can help you get the best rates, reducing overall expenses.

2. Mortgage Conditions: Comparing mortgage conditions from different lenders is crucial. Spanish banks offer various mortgage products, and an independent financial advisor can help you find the most favourable terms, considering interest rates, repayment periods, and other conditions.

Conclusion

Buying a residential property in Spain involves navigating a complex legal and fiscal landscape.

By engaging specialized lawyers, conducting thorough property inspections, utilizing the services of buyer’s agents, and counting with expert financial advice, American buyers can mitigate risks and make informed decisions.

With careful planning and the right support, purchasing a home in Spain can be a rewarding investment and a gateway to enjoying the country’s rich culture and beautiful landscapes.

This article was written by Maryem Essadik, immigration lawyer and head of English-speaking international law firm in Madrid Marfour (Contact: +34 698 917 840, [email protected]).

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