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Local Spain
4 days ago
- Business
- Local Spain
INTERVIEW: 'Spain's 100% tax on foreign buyers will end up in EU courts'
Spain's Socialist-led government has again made headlines after submitting an official proposal in Congress to tax new non-EU non-resident home buyers 100 percent on the value of the Spanish property, an idea first proposed by Spanish Prime Minister Pedro Sánchez in January as a way of limiting "foreign speculation". What has been confirmed now with the draft bill is that the 100 percent tax would apply to the taxable base of the property (the value of the property), which would effectively double its price for these buyers. The legal text presented by the ruling Socialists clarifies that it would not double the property transfer tax (ITP, which is 6 to 11% of the property value depending on the region) as many had previously thought. Such a levy, one of several aimed at addressing Spain's housing crisis, would still need parliamentary approval before it could become a law. Nevertheless, within Spain's legal, fiscal and property spheres, the reaction is one of alarm. "The draft law is very clear: we are talking 100 percent of the highest rateable value," Spanish real estate expert Mark Stücklin, head of Spanish Property Insight, told The Local. "Let's say that's the transaction price of a villa for €300,000€, in which case the tax would be €300,000, minus the ITP deduction. Crazy!" "My reaction is that this would be so ineffective and counterproductive that the PSOE can't really be serious and it's more about trying to outflank Sumar (the Socialists' hard-left junior coalition partner) on the left, but it's getting harder to tell." According to Mallorca-based lawyer Alejandro Del Campo of DMS Consulting, "a State Tax on property transfers which penalises non-residents makes no sense." Del Campo, who has a large portfolio of foreign clients, has appealed in EU courts against several of the Spanish government's discriminatory measures which target non-residents. "The Court of Justice of the European Union has already condemned Spain for discriminating against non-residents with the Inheritance and Gift Tax," the lawyer told The Local, adding that Spanish authorities have also been forced to eliminate discriminating taxes against non-residents vis-à-vis the Wealth Tax and the Solidarity Tax. It's worth noting that many of the laws targeting non-residents predate Spain's current housing crisis, suggesting that Spanish authorities have a longstanding habit of looking at these citizens as a way of filling public coffers. For Del Campo, the 100 percent tax "would flagrantly violate EU law, specifically Article 63 TFEU, which prohibits any restriction on the free movement of capital not only between Member States but also between Member States and third countries." In his eyes, only new builds would be safe from the price doubling, as "new properties are subject to VAT, and the Spanish legislator can't easily interfere with that". Spain's General Council of Economists (CGE) has also spoken out and said that the new supplementary tax on home purchases by non-EU non-residents is "madness," believing it could end up being resolved in court. CGE met with Spain's Registry of Economists and Tax Advisors (REAF) on Wednesday to discuss the Spanish government's proposed new tax on non-EU non-resident property buyers. The general consensus among these experts is that the problem isn't that wealthy foreigners are buying homes, but rather that there is a shortage of properties in certain areas. They therefore doubt the effectiveness of such a "drastic" tax and warn that there are many areas in Spain with significant foreign populations and that therefore there should be some consensus on the issue. For its part, Spain's Registry of Economists and Tax Advisors (REAF) has called the so-called supertax 'shocking' while highlighting that "it's the first time a tax has been established with a 100% tax rate, which raises questions about its potential confiscatory nature". "When the time comes for someone who paid twice the value of their home to want to sell it, will they find someone to buy it? Will they lose money?," said REAF head Agustín Fernández. He therefore considers that were the 100 percent tax to come into force, the subsequent sale of the property by non-resident would be "unviable", as the levy "penalises" investment by non-EU residents. "We imagine the courts will ultimately rule on the tax's confiscatory nature," Fernández concluded.
Yahoo
02-04-2025
- Business
- Yahoo
Debate over taxes to balance budget
With fewer than four weeks left in session, Governor Bob Ferguson is telling state lawmakers in the State House and State Senate that the budgets they recently passed are not good enough and they need to start again. 'Neither budget, however, is close to one that I can sign,' Ferguson said. Ferguson said both budgets include too many tax increases, not enough cuts, and are too reliant on a proposed wealth tax, which he believes will be challenged in court, creating a timeline the state can't afford to wait for as its budget woes increase. As part of its budget, Washington's State Senate passed a bill that would tax $10 on every $1,000 of assets like stocks, bonds, and mutual funds that are worth over $50 million, generating an estimated $4 billion a year. Tuesday, the State House of Representatives passed a budget that includes an $8 per $1000 tax on those assets. 'If the Legislature wishes to complete our work on time, they need to immediately move the budget discussions in a significantly different direction on both of these issues,' Ferguson said in prepared remarks to reporters Tuesday. Ferguson pointed to an increasing forecasted shortfall, from $15 billion in winter to $16 billion in March over the next four years, as a reason for lawmakers, especially those in his own party, to consider more prudent decision-making with Washingtonians' tax money. Ferguson laid out five 'must-have' items for any budget he will sign: Protect the Budget Stabilization Account (Also known as reserves or a rainy-day fund) Base Revenue on Realistic Growth Forecasts Minimize New Investments Must find efficiencies and savings Cannot rely on revenue that can be overturned in Court He added that he'd prefer the Legislature include $100 million in grants for law enforcement agencies as well. Ferguson believes a Wealth Tax would likely be challenged in court. It's the latest attempt to even out the tax burden in Washington, a state that ranks second by tax policy organizations for disproportionately taxing more of lower and middle-income earners' wages as opposed to wealthier Washingtonians. 'We do have a system that is not fair, that is too aggressive. That's a fact,' Ferguson said, 'So I'm open to ways that solve it, but we have to do it in a way that is thoughtful.' Both the Senate and the House budgets included raising the cap on property taxes from one percent to inflation plus population increase, with a 3% limit, and considering a tax on payrolls for incomes higher earners ($176,100 in the Senate bill). Ferguson didn't tip his hand on his stance on those items as he says negotiations continue. Ferguson did raise the spectre of preparing for large funding cuts from the federal government, pointing to an area like Medicaid, where billions of dollars come into the state, or the $2.5 billion in federal assistance to K-12 students. Preparing for that situation is something Ferguson has highlighted to budget writers, including protecting reserves. 'We may not be able to prepare perfectly for what's coming, but we can do a lot. 'Ferguson said, 'There are some big decisions coming in the next few weeks that will determine whether we are at the mercy of Donald Trump from a fiscal standpoint or do we have flexibility?' The Washington legislative session is scheduled to end on April 27.
