Zoë Dahse
SPAIN is facing legal action from Brussels over claims it has been unfairly taxing foreign property owners – many of them retirees and second-home owners from other EU countries.
The European Commission has formally launched an infringement procedure against the Spanish government, arguing that it imposes an additional tax burden on non-resident EU citizens that does not apply to Spanish nationals living in the country.
At the heart of the complaint is Spain’s application of the Non-Resident Income Tax (IRNR), which requires EU nationals who own property in Spain but do not live in the country full-time to pay tax calculated as a percentage of the property’s cadastral value – typically up to 2% annually – even if the property is not being rented out and generates no income.
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The cadastral value (valor catastral) is an official property valuation set by the Spanish tax authorities, often significantly lower than the market value, and used to calculate various local and national taxes.
Spanish residents, by contrast, do not pay this ‘imputed income tax’ on their main home.
Brussels argues that this differential treatment constitutes a breach of EU law, particularly the principles of free movement of capital and non-discrimination within the single market.
In a formal letter of notice, the first step in EU infringement proceedings, the European Commission has given Spain two months to respond and justify its tax policy.
If the explanation is deemed insufficient, the Commission may escalate the case by referring it to the European Court of Justice (ECJ) in Luxembourg.
The complaint is part of a wider effort by the Commission to ensure that EU nationals living or investing in other member states are treated equally under domestic tax regimes.
Spain has previously been found in breach of EU law on similar grounds. In 2014, the ECJ ruled that the country’s inheritance and gift tax system discriminated against non-resident EU citizens, forcing the government to revise its legislation.
Separately, Spain is also being taken to the ECJ over its failure to provide workers with full and clear information on their working conditions, including hours and pay, as required under EU labour law. That case stems from an infringement procedure opened in 2022.
The developments come amid growing scrutiny of how EU citizens—particularly retirees and second-home owners—are treated by member states when residing or investing abroad.
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