Termination of Spain's Golden Visa Scheme

The closure of Spain's Golden Visa programme represents a significant shift in the country's economic and immigration strategies. The real estate investment route will come to an end on 31 December 2024, with the entire programme expected to be fully terminated by 3 April 2025, coinciding with the introduction of new legislation.

What is Spain's Golden Visa Scheme and What Was Its Purpose?

Launched in 2013, Spain's Golden Visa scheme was a key initiative aimed at attracting foreign investment during a period of economic downturn. It incentivised the acquisition of real estate and other assets, including public debt, investment funds, and investments in Spanish companies or projects deemed to be of general interest.

Reasons Behind Spain's Decision to End the Golden Visa Scheme for Foreign Investors

The decision to abolish the Golden Visa has been influenced by several factors highlighted by its critics. These include the detrimental impact on the Spanish property market, questions regarding the economic effectiveness of the scheme, limited residency options for non-EU nationals, and concerns related to security.

1. Negative Impact on the Spanish Real Estate Market:

The termination of this scheme is partly a reaction to the substantial increase in property purchases by foreign investors, which has had a pronounced effect on the Spanish property market, particularly in certain areas. This surge has led to heightened housing prices and, in some cases, gentrification, making it increasingly difficult for residents to secure affordable housing.

2. Questionable Economic Effectiveness:

The proposed amendment raises concerns as to whether the various forms of investment associated with this programme have had a meaningful impact on the economy, casting doubt on its ability to attract foreign capital. This has been a significant factor in moving to eliminate all investor visas, not just those related to real estate. Although alternative investment avenues have not been widely embraced, usage may rise once these become the only available options.

3. Limited Residency Options for Non-EU Nationals: 

Spain does offer other residency options for individuals wishing to bypass permanent residency and tax residency while avoiding the restrictions placed on tourist stays. Alternatives include non-profit residency and residency for digital nomads. However, all of these require applicants to spend more than six months in Spain each year.

4. Security Concerns: 

The amendment also reflects a broader trend across Europe in reassessing or tightening investment visa programmes. Following the Russian invasion of Ukraine, several EU nations have begun imposing restrictions on such permits due to issues related to security and financial transparency, especially regarding the origins of funds. 

Implications for Ongoing Applications: Current Golden Visas and Applications in Process

The new regulations will include transitional provisions to protect existing rights if the amendment is approved.  

Specifically:

- Applications in Process: Applications submitted before the new law takes effect may continue under the regulations in place at the time of submission. It is important to ensure that the investment is completed to initiate the process, with the property duly registered in the Land Registry for real estate investments. Given that the purchase, sale, and registration processes can take up to two months, it is essential to start the visa or residency application before the new regulations come into force—not just the investment process. 

- Renewal of Existing Visas: Visas and authorisations already issued will remain valid until their expiry date, with renewals processed according to the regulations that were in effect at the time of their initial issuance. It is crucial to manage these renewals with care and seek appropriate guidance, as any issues or denial of renewal could prevent reapplying for an investor visa or residency. 

The elimination of the investment residency visa marks a significant shift in Spain's immigration and economic policies. This move aims to mitigate the negative impact on housing access while responding to concerns regarding European security and financial transparency. The amendment signals a necessary adjustment for current and prospective investors: only those with applications already in process or holding a valid authorisation will benefit. 

Although the proposal has not yet been approved, its enactment is imminent. Given the time required to complete an investment and the fast-approaching deadlines for the law's implementation, the countdown has begun for those seeking to secure residency as an investor in Spain. 

Prime Minister Pedro Sánchez announced the decision to phase out this scheme in April. However, the final implementation took place via a closed amendment to the efficiency law, bypassing public debate. This action has drawn criticism for its lack of transparency, particularly as it occurred without the participation of PP deputies due to a natural disaster. 

Impact and Controversy 

The new law is expected to significantly reshape Spain's legal framework concerning property rights and immigration. Supporters assert that these measures address urgent issues like housing shortages and market manipulation. Conversely, critics have expressed concerns regarding the law's limitations and the way certain provisions were introduced. The elimination of Golden Visas, for instance, has sparked discussions about the potential repercussions for foreign investment in Spain's property market.

Timeline

The Spanish Congress of Deputies passed the law on 14 November 2024, and it was published in the Official State Gazette (BOE) on 3 January 2025. The law will come into effect three months after its publication.

Transitional Period

Applications for the Golden Visa will still be accepted during a three-month transitional period. Applications approved prior to the law's enactment will remain renewable even after the transitional period has concluded. 

Existing Applicants

Investors and their families who submit complete applications before the deadline will be granted their visa or authorisation. Current Golden Visa holders will also retain their rights.

Other Investment Opportunities

Alternative investment options, such as capital investments, government bonds, and business ventures, will continue to be available.

As Spain moves forward with these reforms, it must find the right balance between the efficiency of its legal system, stability in the housing market, and the rights of both property owners and tenants. Whether this law will achieve its intended objectives remains to be seen.