Spain’s Proposed 100% Property Tax for Non-EU Buyers: A Case for Bulgarian Residency

20 January 2025

Private Clients, Citizenship by Investment

The Spanish Prime Minister Pedro Sanchez’s recent announcement of a 100% tax on properties purchased by non-EU residents has sparked significant debate in the international property market. 

Whatever one thinks of the fit between the policy and its declared aim is to tackle Spain’s housing affordability crisis by reducing the supposed overseas buyer demand as a source of pressure, it includes a carveout: the tax is not intended to apply to EU residents, whether or not they are EU nationals or non-EU nationals resident in the EU. 

This opens an intriguing pathway for prospective buyers—if a future buyer interested in Spanish property were to obtain EU residency through Bulgaria’s residence-by-investment program first, they would not be subject to the tax and would still invest in Spanish property. Considering the significant advantages of holding Bulgarian residence as such (see below), this becomes a potentially very attractive proposition.

The Spanish Housing Crisis and Proposed Tax

Spain’s housing market has faced increasing challenges, including a severe shortage of affordable homes. In 2023, non-EU residents purchased approximately 27,000 properties, often in tourist-heavy areas like the Costa del Sol and Alicante. Out of a total stock of approximately 27MM properties, this represented 0.1% of the total. Spanish real incomes have in the meantime grown healthily, while new housing construction has slumped.

While we are not housing economists, it is difficult to see how curbing the minimal demand from non-EU residents can affect the market fundamentals, even through any signalling effect it may have to sellers. Seeing that the measure is political and that approvals of new construction are generally harder over time, it is much easier to see why a xenophobic measure – a punitive tax on being out of town – might instead be appealing. 

However, the policy will notably exempt EU residents from the tax. This means that individuals holding residency in any EU member state should be able continue to buy property in Spain without the added financial burden. For non-EU nationals, this creates an opportunity to obtain EU residency and retain level playing field access to the Spanish property market.

The exemption of EU residents is not necessarily politically motivated. One suspects that had it not been necessary, the Spanish Government would have targeted Frenchmen and Germans as much as  Americans and Britons. Rather, including EU residents within the scope of the policy would have been unlawful and a recipe for a clash with the EU Commission. 

Bulgarian Residency: A Strategic Gateway to Spain

Bulgaria’s residence-by-investment program offers a straightforward and cost-effective pathway to EU residency. By obtaining Bulgarian residency, individuals can not only enjoy the benefits of access to the EU but also legally purchase property in Spain without incurring the proposed 100% tax.

Under this program, applicants can achieve permanent residency by investing, for example, in regulated Bulgarian funds. The process is efficient, transparent, and designed to attract long-term investors. Once granted residency, individuals gain access to the rights and privileges of EU residents, including the ability to invest in Spanish property under the same rules as citizens of EU countries.

Alternatively, for property investors who wish to have a less capital-intensive route to EU residency, Bulgaria offers other routes such as becoming Trade Representatives.

Key Benefits of Bulgarian Residency

  • EU Residency Advantages: Residency in Bulgaria allows for visa-free travel across the Schengen Area
  • Cost-Effective Investment: The Bulgarian residence-by-investment program offers flexible and affordable options tailored to different financial goals.
  • Avoid the Spanish Tax: As an EU resident, buyers are exempt from Spain’s proposed 100% property tax for non-EU, non-resident investors.
  • Stable Legal Framework: Bulgaria provides a predictable and investor-friendly legal environment, making it a reliable base for obtaining EU residency.

A Practical Example

Consider a prospective buyer from the UK who wishes to invest in a Spanish holiday home. Without EU residency, they would face the 100% tax over the value of the home under Spain’s proposed policy. The average price of a 2,200 square foot (200 square metre) house in Spain is EUR 630,000 (rising to EUR 1.3 MM for a property in Marbella). This would imply a tax of EUR 630,000 in addition (or a whopping EUR 1.3 MM of tax in Marbella). 

By investing ~EUR 500,000 in a Bulgarian fund, the investor would forgo the tax obligation and instead acquire an investment – this might in its own right potentially lead to the holding of a separate property in Bulgaria.This approach also benefits those looking to diversify their investments across multiple EU countries. Bulgaria’s competitive tax regime, combined with its accessible property market, makes it an ideal starting point for building a portfolio within the European Union.

Conclusion

Spain’s proposed swingeing 100% property tax for non-EU buyers has raised concerns among investors, but it also highlights the value of EU residency as a solution. By securing Bulgarian residency through its residence-by-investment program or other routes, individuals can continue to access Spain’s property market without falling victim to the unfair and discriminatory treatment proposed by Prime Minister Sanchez.

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© New Balkans Law Office 2025