EU demands Spain stops taxing non-residents on their homes

There could be some good news on tax on the way for non-residents in Spain who own a property in the country that they don’t rent out when they are away from it or generate income from.

The European Commission is unhappy that Spain taxes non-resident foreigners annually on the value of property they own in the country regardless of if they earn income renting it out or not.

Taxpayers who live in Spain are not subject to an annual property income tax on dwellings they use as a home (even for short periods) and that they don’t earn rental income on.

In contrast, non-residents are required to pay tax between 19 to 24% on up to 2% of the cadastral (rateable) value of their dwellings in Spain used as a residence, even if they have no rental income from it.

The EU has demanded that the Spanish authorities put an end to this taxation, considering it discriminatory and stating that this treatment affects the free movement of workers and capital.

Brussels sent a letter of formal notice to the Spanish authorities, which will now have two months to respond and remedy the issues highlighted by the Commission. If they fail to do so, the case will be referred to the Court of Justice of the European Union (CJEU).

Working conditions

Brussels’ patience has also come to an end on an ongoing matter on labour law.

On Wednesday, the European Commission asked the European Court of Justice to impose fines on Spain for failing to bring into national law the European directive on transparency and predictable working conditions into national law. Brussels considers that the efforts made by the Spanish authorities to transpose this legislation have been “insufficient”.

The directive in question requires that workers receive timely and full information on the essential aspects of their job, such as working hours and pay, among others. It also limits the probationary period for workers to a maximum of six months, benefiting between two and three million employees in precarious jobs.

Infringement proceedings against Spain were opened in September 2022. In February this year, the country notified the EU that it had transposed some aspects of the directive into national law, but not all.