This was the tenth of 12 proposed measures which he highlighted was against the backdrop of a 48% leap in houses prices over the past decade across Europe.

It would be aimed at limiting property purchases by “non-resident non-EU foreigners. The government will increase the tax burden on such purchases, up to 100% of the property’s value”.

He was speaking at the forum ‘Housing, the Fifth Pillar of the Welfare State‘, alongside the senior leadership of his government, representatives from the construction sector, and social stakeholders, to present the main points of a plan which he said was inspired by models from countries like Denmark and Canada.

“The west faces a decisive challenge: to not become a society divided into two classes, the rich landlords and poor tenants”, he said.

This was “an unprecedented measure in our country’s history, already applied in other democracies like Denmark and Canada, and highly appropriate given the housing emergency situation,” Sánchez said, adding that in 2023, non-residents bought 27,000 properties in Spain, primarily for speculation.

But Sánchez did not detail how the tax would work or timeline for parliamentary approval, while the government said the proposal would be finalised “after careful study”.

In early reaction, Mauro De Santis Bo, financial adviser at GSB Wealth said: “With years of experience helping Britons relocate to Spain, we know how popular it is for its lifestyle and climate. However, Spain’s proposed 100% tax on property purchases by non-EU buyers could shift interest toward alternatives like Portugal, Cyprus, or Greece.

“Also, in response to the Prime Minister’s claim that people are buying for ‘mainly for speculation’, this has not been my experience, instead it’s about creating a home or enjoying retirement. We’ll be monitoring these changes closely to help clients make informed decisions and consider alternative destinations if needed.”

On 20 June, the Spanish Supreme Court reportedly cancelled the clause of the country’s immigration rulebook that allows migration authorities to remove temporary residence permits from those who spend six months or more outside of Spain within a one-year period.

The change reportedly means that temporary residency can only be removed by force of law, not because of how long you’ve been out of the country.

Jason Porter, business development director at Blevins Franks, said: “This is unlikely to be the final word on this matter; the six-month rule could be reimposed in the future via a higher level of Spanish legislation.

“While the Supreme Court has terminated the requirement of having to spend six months in Spain to validate a temporary residence permit, the same court has confirmed this should be legalised by way of a change in the Immigration Law, a higher level of law than just a Regulation, the form it currently takes.”

The ruling means that anyone who has temporary residence in Spain, which is up to five years, can now leave the country for more than six months in a year if necessary and will not have to worry about losing their permit when they return. After having lived in Spain for five years, non-EU nationals are able to apply for a long-term residency card.

Porter added: “This change could result in a huge amount of confusion for those individuals who after five years have the opportunity to elevate their Spanish residence permit from temporary to permanent. Alongside the six-month rule, there is also the fact the individual cannot be absent for more than 10 months in total in the five-year period prior to the permanent permit application. This rule remains, so with absences of more than six months a year, they can renew a temporary residence permit, but not upgrade it to permanent version.”

At the same time, many look longingly towards a holiday home in sunny southern Europe, or even something more permanent as a means of escaping ever higher capital taxes in the UK, or the threat of a dreaded wealth tax.

But what is the position in Europe when it comes to property? Would you be jumping out of the frying pan and into the fire, or is it much more of a benign situation? Let’s take a look at three countries the British tend to favour – France, Spain and Portugal – and see what the position is.

Whether capital gains tax is due will depend upon whether a property was occupied as the main family home. Each country has its own reliefs and allowances around the main home, but the UK rules vary considerably from those of the EU.

It is also important to realise that if the client has a property in a country that is not where they reside (eg, a holiday home or rental abroad, an old UK main home they may have retained after moving abroad, etc.), then they are likely to have to declare a sale in both countries, with the tax position decided according to the Double Tax Treaty (DTT) the UK has with each country concerned.

A DTT is designed to prevent double taxation, by only taxing the disposal in one of the two states, or taxing it in both, but allowing for the tax paid in one to be set off against the liability in the other.

The UK’s private residence relief (PRR) means that if the property was always occupied as the main home and sold within nine months of moving out, then no tax will be due. If this is not the case, then the gains are apportioned between qualifying and non-qualifying periods, with the non-qualifying potentially taxable (though other reliefs might reduce the taxable portion). The nine-month period of exemption has gradually been whittled down over the past nine years from what was 36 months in 2014.

Suffice to say, the simplest position is a sale of the UK home before leaving the country, meaning the situation in France, Spain or Portugal should not be an issue. If this is not possible or desired, then the local rules will also need to be reviewed on sale.

UK non-residents became subject to gains that accrue on UK residential property from 6 April 2015, but it is only the gain since that date which is potentially taxable. So, if the old UK home is retained beyond nine months, and until the individual is resident abroad, they will at the least have a declaration to make and may even have some tax to pay in the UK on disposal.

France

In France, main home relief applies if they have continuously occupied a property prior to sale. In addition, there is also a 12-month relief window if they leave the property but sell it within this period.

But main home relief in France is an ‘all or nothing’ relief; a second home in France could be occupied as the main home just prior to a sale and the full relief is given, while on the other hand a property that was the main home for decades could fall foul if it is not occupied at the point of sale or within the last 12 months.

The latter could occur where they have chosen to retain the old UK main home beyond moving to France.

Residents of France pay tax at 19% on gains on property. There is an additional tax (2%, rising to 6%) on property capital gains exceeding €50,000 (£43,000, $55,000). Social charges of 17.2% also apply to all property gains (though this may be reduced to 7.5% for UK nationals of state pension age), an overall rate of 36.2% or 26.5% (plus the additional 2% to 6% tax).

If there is tax to pay, this is reduced if the property was owned more than six years, with total exemption from capital gains tax after 22 years and social charges after 30 years of ownership.

Spain

In Spain, main home relief is only available where the whole proceeds are reinvested in a new main home, or the vendor is over 65 years of age.

But Spanish main home reinvestment relief has certain requirements which might prove tough to satisfy: they must have lived in the property they are selling for a continuous period of at least three years, they must have sold the property within two years if they have moved out, they must also buy a new main home within a period of two years of the sale and live in the new property for a continuous period of at least three years from the date of acquisition.

Even then the tax relief is only based on the proportion of the sale proceeds reinvested in the new home. If the new home costs more than the old home sold for, then the gain is exempt, but only reinvest half the proceeds and the other half is chargeable – quite a common scenario for UK nationals moving to Spain.

Depending upon the sums involved, it may just be simpler (and more beneficial) to sell the UK property prior to taking up Spanish tax residence.

In the case of UK nationals over 65 years of age living in Spain who had retained their former UK home, if they could sell this within two years of moving out, then this gain will be exempt if they are Spanish tax resident at the point of sale.

The same person would also be exempt on the subsequent sale of their main home in Spain if they had lived in the property for over three years and sold it before ceasing Spanish tax residency, with no need to reinvest in a new property.

Any chargeable gains are taxed at progressive rates between 19% and 28% on Spanish residents. The 19% band applies to the first €6,000, with the next €44,000 at 21%, and so on, with gains over €300,000 hitting 28%. Non-Spanish residents will be taxed at a flat rate of 19%.

Portugal

In Portugal, new tax residents can register as a ‘non-habitual resident’ (NHR) with the Portuguese tax authorities, which confers special tax treatment for ten years. For UK real estate, the UK/Portugal DTT says that property gains may be taxed in the country where the property is located. As the UK has taxation rights the gains are exempt in Portugal under the NHR regime for those ten years.

A UK national resident in Portugal would always be subject to tax on Portuguese real estate gains, and on non-Portuguese real estate gains once the 10-year period of NHR has concluded.

The gain on a sale of a main home in Portugal is exempt if the proceeds are reinvested in another main home in Portugal or elsewhere in the EU (as long as there is an exchange of information clause with Portugal regarding tax matters) within three years after, or two years before the date of disposal. As a direct consequence of Brexit, acquiring a main home back in the UK will not suffice.

Otherwise, residents of Portugal are taxed on only 50% of the property gain, as well as benefitting from inflation relief after two years of ownership. Taxable gains are added to other taxable income and taxed through the progressive scale rates rising from 14.5% to 48%.

All this seems to confirm that nothing is simple if they choose to keep their old UK main home after moving abroad, and the reliefs available in France, Spain and Portugal need some real disciplined planning to actually benefit from them. Careful review of the position is essential before they actually leave the UK and again before sale, less they find themselves with an unexpectedly nasty tax bill.

This article was written for International Adviser by Jason Porter, business development director of expat financial advisory firm Blevins Franks.

The Madrid office assists private clients relocating to or doing business with Spain, and corporate clients and funds investing in real estate or private equity in Spain.

In particular, the office further strengthens Trident Trust’s offering for Latin American private and corporate clients.

Experienced international lawyer Emiliano Cordoba will head the office.

Working in the financial services industry for the last 20 years, Cordoba has previously held senior positions in fiduciary, advisory and business development in the British Virgin Islands, Monaco, Spain and Switzerland.

He was most recently director of Geneve Family Office in Switzerland.

Cordoba said: “We go where our clients need us, and Spain was a natural step for us to provide them with more localized and immediate support. Our private clients moving and investing here, particularly from Latin America and Asia, and our fund clients with assets in Spain, now have a partner on the ground to support them.”

Founded in 1978, Trident Trust is an independent corporate, fiduciary and fund administrator, employing over 900 staff across a global footprint that spans Africa, the Americas, Asia, the Caribbean, Europe and the Middle East.

Then a Spanish ‘Digital Nomad’ visa might be the answer, writes Jason Porter, business development director of Blevins Franks.

It brings tax breaks too.

A recent report issued by the House of Lord’s Economic Affairs Committee suggests that 565,000 people left the UK jobs market from March 2020 to date – most of whom were believed to have taken early retirement. Many of those would have moved to Spain – the UK’s favourite retirement destination.

Would they have been one of them if they had been old enough to access their pension?

If they are in their early 50s and dream of retiring to sunnier European climes, then the Spanish digital nomad visa might act as an interesting stopgap, while they work away the last few years before they can retire. What better way can there be of doing that in a warmer, more relaxed environment, with a lower cost of living?

They will also benefit from a very attractive tax rate for up to five years.

If the client has an understanding employer who they think would be open to them performing their role from a desk in Spain, or they have a number of contracts, then this might be an option worth investigating.

Not only might this visa allow them to get to Spain sooner than they thought, but it will also mean they pay tax on earnings at significantly lower rates than they would in the UK.

As they are regarded as a non-Spanish resident for all other taxes they should not suffer Spanish taxes on:

• Interest, dividends or other investment income where this arises outside of Spain;
• Capital gains from disposals of non-Spanish assets; and
• Wealth tax on non-Spanish assets.

Spain has been talking for years about introducing a specific visa for attracting wealthy remote workers and finally delivered at the end of 2022.

They repurposed an old 2005 Tax Decree, known as the ‘Beckham Law’ (after David Beckham who was one of the first foreigners to take advantage of it when he moved to Real Madrid), in the form of its new ‘tele-worker’ tax legislation.

This new digital nomad visa option limits Spanish tax to a flat rate of 24% on the first €600,000 of earnings for up to five years (any excess each year is taxed at the top rate of tax).

Under this option the taxpayer does not benefit from personal allowances or any other reliefs and deductions normally due, so it will require them to have relatively substantial annual earnings to make it not only financially worthwhile, but also to justify the initial cost of any move to Spain.

While some advisers have stated it is open to both employed and self-employed people, this may not be the case, as ‘first adopter’ freelancers are finding in their dealings with the Spanish immigration authorities. Any employer cannot be a Spanish entity and must have been in existence for at least one year and the employment contract for at least three months.

They must hold a suitable qualification or have at least three years’ work experience. They will need to spend at least six months a year in Spain and remain non-UK tax resident.

Spain has been under considerable pressure to get this legislation on the books, and initial applicants are finding some of this granularity still needs finessing. Certain areas such as whether the self-employed qualify and what is an acceptable shareholding need more work and it is inevitable there will be some minor clarifications and legislative tweaks along the way.

While the digital nomad visa initially appears interesting to young tech-types who can work anywhere, closer inspection confirms it is really designed for the wealthier remote worker, who has sufficient earnings to fully benefit from the 24% tax rate. So they have to be sufficiently committed to invest in a long-term lease or intend to exchange their UK home for one in Spain and similarly prepared to pay the cost of private medical insurance each year they benefit from the visa.

But the total tax benefits could be tremendous when you factor in the other Spanish tax savings which might arise on investment income, capital gains and wealth tax.

This article was written for International Adviser by Jason Porter, business development director of Blevins Franks.