Spain: Navigating the 2025 Tax Landscape

As we move through 2025, both Spain and the UK are undergoing significant tax and regulatory changes that may affect your financial planning. Below we highlight the most important developments.

Across the EU, governments are required to deliver their budgets in October each year, aligned with multi-year fiscal roadmaps approved by Brussels. For Spain, delays during 2024 meant that the draft budget was scrapped and replaced with a new fiscal plan for 2025. Approved by the European Commission in November, this plan sets out measures for the next seven years to reduce the national deficit and debt.

Headline Changes Affecting Residents and Investors

• Household costs rising: VAT on staple food items reverted to 4%, VAT on electricity rose back to 21%, and fuel duty was increased, adding pressure to monthly bills.
• A total of nine tax rises in 2025: Measures approved by Congress at the start of this year aim to raise €4.5 billion annually.
• Bank & savings taxation: A new Bank Tax applies to margins and commissions (1%–7%), while savings income over €300,000 is now taxed at 30% (up from 28%). This could affect investment returns, including policy withdrawals.

Proposed Property Tax for Non-EU Buyers

One of the most eye-catching and controversial proposals currently under discussion is a levy of up to 100%of the property value on homes purchased by non-EU residents — which would include British buyers post-Brexit, as well as purchasers from the US and other third countries.

Prime Minister Pedro Sánchez has argued that “unprecedented” measures are necessary to tackle Spain’s housing emergency and to prevent the country from becoming “a society divided into two classes, the rich landlords and the poor tenants.” He highlighted that in 2023, non-EU residents acquired around 27,000 properties in Spain, many of them not as primary residences but as investment properties.

These figures align with data from the Spanish Property Registry, which reported that foreign buyers as a whole (both EU and non-EU) accounted for 15% of all property sales in 2023 —approximately 87,000 out of 583,000 transactions.

If enacted, such a measure would mark a radical shift in Spain’s real estate market, with potentially significant implications for international investors and for regions that traditionally attract high levels of foreign property ownership (such as the Costa del Sol, Costa Blanca, Balearics, and Canary Islands).

Wealth Tax & the Solidarity Tax

Wealth Tax has long applied to Spanish residents with worldwide assets above €700,000 (after allowances) and to non-residents on Spanish assets.

Some regions, including Madrid and Andalucía, grant a 100% exemption. To counter this, the central government introduced a temporary Solidarity Tax in 2022.

• Rates: 1.7% (from €3m–€5.34m), 2.1% (€5.34m–€10.7m), and 3.5% (above €10.7m).
• Key point: The Solidarity Tax is based on Wealth Tax rules, meaning exemptions (such as €300,000 for primary residence and business assets) still apply, but liabilities can quickly become significant for high-net-worth individuals.

Inheritance and Succession Tax – Regional Reliefs

There has been a steady trend towards reducing or eliminating succession tax across Spain’s autonomous communities:

• Madrid & Andalucía: 99% relief for close family, with extra allowances for siblings and extended family.
• Balearics: From July 2023, a 100% exemption for spouses, parents, and children, with reduced rates for wider relatives.
• Canary Islands: Since September 2023, a 99.9% exemption for Groups I–III (including gifts in many cases).
• Valencia: From September 2023, 99% relief for spouses, children, parents, and grandchildren, aligning with Murcia and Andalucía.

These reforms have substantially reduced liabilities for most families, but planning remains crucial, particularly for non-residents and those with more complex estates.