Owning high-end real estate in the European Union in 2025 means navigating an increasingly complex tax landscape. Luxury properties—from Parisian apartments to Tuscan villas and Spanish coastal estates—are under tighter fiscal scrutiny as governments seek to regulate overheated housing markets and increase tax fairness. Here’s what property owners need to know this year.
What Qualifies as Luxury Property?
The definition of “luxury” varies by country, but generally includes:
- Properties valued over €1–2 million
- Homes with premium features like pools, large gardens, sea or city views
- Historic estates or architecturally significant properties
- Prime urban residences in capital cities or exclusive neighborhoods
In some jurisdictions, even moderately priced second homes in popular areas may fall into this category if demand is high or tax thresholds are low.
France: IFI Wealth Tax on Real Estate
France applies the Impôt sur la Fortune Immobilière (IFI) to net real estate assets worth more than €1.3 million. This tax applies whether the owner is a French resident or not, and affects global property holdings for residents.
Key facts for 2025:
- Tax rates range from 0.5% to 1.5%
- The main residence enjoys a 30% value reduction
- Structuring ownership through French SCI companies remains common, but authorities are cracking down on tax evasion via opaque structures
Spain: Wealth Tax and Regional Levies
Spain continues to enforce a wealth tax (impuesto sobre el patrimonio) on individuals with net assets exceeding €700,000 (excluding a €300,000 primary residence allowance).
In 2025:
- Rates go up to 2.5%, depending on the region
- A “solidarity tax” also applies to wealth above €3 million
- Regions like the Balearic Islands may introduce extra levies on second homes or foreign buyers
Discussions are ongoing about new restrictions and taxes targeting luxury purchases in high-demand regions to cool speculative buying and support local affordability.
Italy: Real Estate Taxation and Flat Tax Regime
Italy doesn’t impose a traditional wealth tax but levies:
- IMU on second and luxury homes
- IVIE, a 0.76% to 1.06% tax on foreign-owned property
Italy also offers an appealing flat tax regime: new residents can opt to pay €100,000 annually on foreign-sourced income, including returns from international real estate. This regime continues to attract wealthy expats and retirees.
Germany: Property Tax Reform
While Germany does not have a wealth tax, changes introduced in 2025 are reshaping property taxation:
- Grundsteuer reform has recalculated values, affecting tax bills for many owners
- Taxes on capital gains apply if property is sold within 10 years of purchase
- Inheritance tax can also apply to high-value homes
There are ongoing debates about whether to reintroduce a broader wealth tax targeting luxury assets, but no implementation is expected in 2025.
The Netherlands: Tax on Imputed Returns
Dutch residents pay taxes on the assumed return from wealth, not the actual income.
- In 2025, real estate is assumed to generate a return of around 6–8%
- This fictional return is taxed at approximately 36%
- The system, known as Box 3, has faced legal challenges and will likely be replaced or reformed by 2026
This makes the Netherlands one of the EU’s most taxing countries for real estate wealth—particularly for investors holding non-rental property.
Portugal: Higher Transfer Tax on Luxury Homes
Portugal’s IMT (property transfer tax) now includes a 7.5% rate on property purchases above €1 million. Luxury real estate buyers face higher costs at the time of acquisition, and the removal of the Golden Visa program in previous years has slightly shifted investor interest.
Still, Portugal remains a favored destination for European and international high-net-worth individuals due to its climate, safety, and relatively low income taxes.
Belgium: Reform of Cadastral System
Belgium doesn’t apply a wealth tax but levies annual taxes based on cadastral income, which often underrepresents real market value. In 2025, a reform initiative is underway to update these outdated assessments, which could mean higher taxes for luxury homeowners once implemented.
Where Is the Tax Burden Highest?
As of 2025, countries with the most substantial property tax obligations for luxury homeowners include:
- France – due to the progressive IFI
- Netherlands – because of the notional income system
- Spain – with combined regional and solidarity wealth taxes
EU-Wide Efforts Under Discussion
The European Commission has begun assessing the possibility of coordinating luxury property taxation across the EU. While a unified tax is unlikely soon, proposals include shared databases of high-value real estate and cross-border enforcement measures.
Expert Opinions
Pierre Martin, tax advisor in Paris:
“High-end property owners must think strategically. Holding property through structures like SCIs can still work but must be fully transparent. Tax audits have increased since 2024.”
Lucia Fernández, real estate lawyer in Barcelona:
“Our international clients are concerned about proposed taxes on foreign second homes. It’s pushing some to reconsider where they invest or how they structure ownership.”
Smart Tax Strategies for 2025
- Use legal entities or family trusts to hold property
- Choose tax-friendly residency regimes
- Split ownership between spouses or heirs
- Benefit from flat tax systems where available
- Regularly review legal and fiscal structures with advisors
Final Thoughts
There’s no one-size-fits-all “luxury tax” in the EU, but the message in 2025 is clear: high-value property is under closer scrutiny. Owners must monitor developments in each country they invest in and structure holdings carefully.
With regulations tightening and cross-border coordination increasing, now is the time to engage with experienced legal and tax professionals to ensure your real estate investments remain secure, efficient, and compliant.
