Mark StücklinEvery year the Tax Foundation publishes its International Tax Competitiveness Index (ITCI), a ranking of OECD countries by how competitive and neutral their tax systems are. Spain does not shine.
In the 2024 edition Spain came in 33rd out of 38, which is low but still ahead of close neighbours and competitor for foreign buyers of second homes Portugal (35), France (36), and Italy (37). The UK, the main source of foreign buyers, managed a slightly better 30th place. But drill down into the property tax sub-ranking and Spain languishes near the very bottom: 37th out of 38, ahead only of Colombia.
Why property is so heavily taxed in Spain
Property is one of the easiest things for governments to tax. Unlike income, investment portfolios, or even employment, you can’t pick up a villa in Mallorca and move it to a low-tax jurisdiction. Bricks and mortar are immobile and visible, so tax authorities can squeeze them without much fear of evasion.
That’s exactly what Spain does. The tax burden on property here is high because other forms of economic activity have been pushed into the shadows by a heavily regulated, high-tax economy. When businesses or individuals hide activity in the black economy, the government compensates by taxing what it can see – namely, property.
Efforts to avoid real estate taxes do exist (for example paying part of the transfer tax or rental income in cash), but they are risky and limited. Ultimately, the state knows where your property is, how big it is, and who owns it.
How Spain taxes property
Spanish property buyers and owners face a battery of taxes, including:
- Transfer tax (ITP) of 6–11% when buying a resale home (or VAT on new homes, plus stamp duty).
- Annual property tax (IBI), levied by local councils.
- Wealth tax on high-value assets, including real estate, in some regions.
- Capital gains tax on profits when selling.
- Rental income tax, which hits non-residents particularly hard at 24% on gross income if they live outside the EU.
- Inheritance and gift tax, which varies wildly by region but can be onerous.
Few OECD countries levy such a broad and heavy mix. The result is a highly uncompetitive property tax regime that leaves Spain sitting near the bottom of the ITCI ranking.
Property rights and political attitudes
Tax is only half the story. Spain’s wider attitude to private property ownership is lukewarm at best. Squatters enjoy rights that can take months or even years to dislodge, and landlords are often portrayed as parasites rather than investors providing housing.
The current Socialist-led government has shown little love for private landlords or foreign investors. Prime Minister Pedro Sánchez recently floated a trial balloon of a 100% tax on non-resident buyers from outside the EU – a proposal that would effectively drive them away if it were ever enacted.
If it’s so bad, why do people still buy?
Given the punitive tax regime and shaky property rights, it’s reasonable to wonder why anyone buys in Spain at all. But buyers keep coming. Domestic demand is strong, and foreign buyers are at record highs. The latest notary figures show sales in Q2 2025 close to all-time records, with prices still rising. Land registry data confirms that foreign investors are more active than ever.
This creates a paradox. Spain offers investors little in the way of tax efficiency or legal certainty, yet demand is robust. The sun, sea, food, lifestyle, and cultural cachet of Spain seem to outweigh the negatives.
For the government, that removes any incentive to reform. As long as people are queuing up to buy, there is little pressure to make property taxes more competitive or to strengthen property rights.
Takeaway
Spain’s ranking near the bottom of the OECD for property taxes is not a fluke. It reflects a deliberate fiscal strategy that sees property as a safe and lucrative tax base, combined with political attitudes that are far from friendly to private landlords and foreign buyers. The puzzle is not why Spain taxes property so heavily, but why so many people still line up to buy in spite of it.
