We have started 2018 without Property Tax in Spain, as there is a full tax relief.

We do have to pay the Tax for 2017 (tax returns can be filed till the end of June 2018) because Royal Decree-Act 3/2016, of 2 December (Official State Gazette, BOE, of 3/12/2016), eliminated that tax relief for 2017, and the same rule establishes the tax relief for 2018.

It looks like we shall not have to pay Property Tax in May/June 2019. However, we’d better NOT celebrate yet, because this is a YO-YO Tax, accruing on 31 December every year, and the Spanish lawmakers and those of the Autonomous Communities have a habit of switching it on in extremis, in the latter days of the year and applying to the year that is about to end.

Check this out for evidence:

– ON: Act 50/1977, of 14 November, established the Extraordinary Tax on the Property of Natural Persons exceptionally and temporarily.

– ON: Act 19/1991, of 6 June, regulated the new Property Tax, ending its exceptional and temporary nature.

– OFF: Act 4/2008, of 23 December, eliminated the tax charge, introducing a full tax relief.

– ON: Royal Decree-Act 13/2011, of 16 September, re-established the Tax in Spain temporarily (presumably just for 2011 and 2012), in order to weather that stinkin’ economic crisis. In other words, Spaniards were told in extremis, towards the end of 2011, that because of that stinkin’ crisis they would have to pay property tax in 2011.

In any event, the limit for exemption on the primary home was raised (up to €300,000) and a minimum exempt amount was established of €700,000, higher than the previous minimum, though it may be amended by the Autonomous Communities.

– OFF in MADRID: Act 3/2008, of 29 December, of the Community of Madrid, established a full relief on the tax rate for its residents, which CURRENTLY REMAINS IN FORCE in Section 20 of the Consolidated Text of the Legal Provisions of the Community of Madrid in the field of the taxes assigned by the State, approved by Legislative Decree 1/2010, of 21 October.

– OFF in VALENCIA: Act 9/2011, of 26 December, of the Generalitat of Valencia, applies a full tax relief for residents in that Community, who do not pay Property Tax for 2011.

– OFF in the BALEARIC ISLANDS: Balearic Decree Act 6/2011, of 2 December 2011, applies a full tax relief for residents in that Community, who do not pay Property Tax for 2011.

– ON in VALENCIA: Act 10/2012, of 21 December, of the Generalitat of Valencia, eliminates the full tax relief for residents in that Community, therefore in extremis, right at the end of 2012, they were told that they would get to pay Property Tax for 2012.

– ON in the BALEARIC ISLANDS: Balearic Islands Act 15/2012, of 27 December, on the Balearic Budget for 2013, eliminates the full tax relief for residents in that Community, therefore in extremis, right at the end of 2012, they are told that they too get to pay Property Tax for 2012.

– ON, ON, ON, ON, ON: Despite the fact that the State had re-established the tax ‘temporarily’, presumably just for 2011 and 2012, it was then extended year after year, for 2013, 2014, 2015, 2016 and the last time for 2017, via Royal Decree-Act 3/2016, of 2 December.

Meanwhile, Madrid is the only Autonomous Community that maintains full tax relief for its residents, whereas other Communities have used their regulatory capacity to substantially increase the tax, by reducing the exempt minimum and/or increasing the applicable tax rate.

– OFF? On 30 December 2017 the Official State Gazette (BOE) featured a battery of tax regulations, including Royal Decree-Act 20/2017, extending and approving several tax measures, but no regulation has extended Property Tax for 2018.

Maybe it slipped them, as suggested by Jaume Viñas in Cinco Días in an article of 3/1/2018, or they (the Government and Lawmakers) simply know that they have the entire 2018 to bring it ON again. They could do it in the Budget Act for 2018 that is yet to be approved, in the Act amending the financing system for Autonomous communities, if and when they pull that one across… or even further in extremis, in a Royal Decree-Act that could be published in the BOE on Saturday, 29 December 2018.

Precisely, as Jaume Viñas explains in that article, the expert committee for the reform of financing of autonomous communities, who delivered their report last summer, was divided regarding this tax. Some of them are of the understanding that the tax should be eliminated, mentioning that there is no such tax in most EU countries (only in France, where they plan to eliminate it in 2019), whereas other experts consider that autonomous communities are in no position to relinquish any sources of revenue. There is a degree of consensus regarding the need to harmonise this tax and establish a homogeneous tax base throughout Spain, together with a high, common exempt minimum amount. The committee also backed in their report that the communities wishing to do so apply a full tax relief, the way Madrid does at present.


And, as has often happened, if again they switch it ON, when foreign millionaires drop by my law firm because they’re in love with Mallorca and want to become residents here, I’ll explain to them what that means (taxing their global income, their global property, using form 720, etc., etc.), and I’ll watch how their love starts to crumble, little by little. Then they’ll ask me how they can live here for a few months every year without being considered residents in Spain for tax purposes, and with a bit of luck these foreigners will buy property around here, for which they will have to pay Property Tax to the State Treasury if the value exceeds €700,000 (they can apply the exempt minimum established by the State and the state tax rate, without being affected by rises in the Autonomous Community’s tax rate).

Palma de Mallorca, 12 January 2018

Alejandro del Campo Zafra

Solicitor and tax consultant