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Since 24th June 2016 one of the most frequently asked questions we are asked is “How will Brexit affect British property owners in Spain?” Clearly, many of those who are considering buying property in Spain are concerned about the impact that the vote to leave the EU will have upon their ownership of a property in Spain.
In this article Jonathan Eshkeri, Director of E&G Solicitors in Spain, guides you through his view of how Brexit will affect British property owners in Spain.
So, how will Brexit affect British property owners in Spain? Much has been written about the effect of Brexit on Brits who live, own property and holiday in Spain and far more will be written and discussed until Article 50 is invoked, as those of us who either live or own property on the Spanish mainland or the islands consider our route to safety once we know and understand the terms of the United Kingdom’s farewell to what we used to call “the continent”.
But is it fair to say that in one way or another we will be saying goodbye to our European neighbours, creating a distance between us often associated with the parting of friends or work colleagues, or are we overreacting to the political hype that surrounded the campaigns to leave and to remain and which continues to affect to a great extent what we understand about the deal to be struck with the EU, whereas in fact the differences will be barely noticeable? Are we doomed to suffer change whatever the outcome?
What is certain is that to whatever extent we separate from the EU, none of us has any idea of the deal that will be crafted between the UK and our European neighbours. There is clearly a mood for change whatever the final outcome.
Brexit and British holiday home owners in Spain
So, looking at the “down side”, often a good place to start for the purposes of comparison, in the event of a total separation of the UK from the EU what exactly will be the position of Brits who own, or who want to own property in Spain with the intention only of holidaying there?
Frankly, there will be almost no change. It is extremely unlikely that a visa will be required to enter the country, and in any event any visa application would almost certainly be subject to a visa waiver programme similar to the ESTA programme in the USA. No-one holidaying needs more than three months in the country at a time; the purchase taxes and council tax will remain the same. The rights of property ownership will be unchanged, as will be purchase tax, stamp duty and VAT. On the ground, during one’s lifetime, there will be almost no noticeable difference.
If you are considering buying a property in Spain and you are unsure of the costs associated, please take a look at our article on the costs of buying a property in Spain.
Brexit and taxation in Spain
In recent times the Spanish government has brought its inheritance and income tax rules into line with the EU further to recent decisions of the European Court of Justice, so that Brexit, in the worst case scenario, will mean that instead of paying tax on rental income at a rate of 19%, Brits will pay tax at the rate of 24%, which could be set off against their tax bill in the UK for the same income.
Upon death a higher rate of inheritance tax would be paid on Spanish assets owned by Brits. In fact, that higher rate would be the same rate that was payable by Brits until a recent ruling of the European court forced Spain to offer European nationals the same inheritance tax breaks as it offers its own residents.
Brexit and Brits who are resident in Spain
Those of us who want to live in Spain for most of the year, or to continue living there on a permanent basis, face a more uncertain future. Citizenship of an EU member state leaves us in no doubt that we have the right to remain in Spain permanently and that upon retirement we will have the same access to the Spanish healthcare system as a Spaniard who has been paying his stamp since he was 18 years old. Leaving the EU altogether will almost certainly mean that we will have to pay for our own healthcare, or purchase medical insurance as a sensible alternative.
That, of course, presupposes that Brits will have a right to remain in Spain at all, as others without a right to remain we may well need to take such steps as to make a considerable investment in property, or deposit extremely significant sums in a Spanish bank account, or purchase even greater amounts of Spanish government bonds, or invest in and run a Spanish business, to be able to remain in Spain indefinitely. Those from China and Russia spring to mind, not to mention the USA. But surely we must keep a grasp on reality. Depending upon which newspaper you read, there are between 319,000 and 760,000 Brits living in Spain currently. It stands to reason that at the very least a bilateral agreement will be struck to cater for them and their needs. Surely nobody expects them to up sticks and go back from whence they came, when they may have already made Spain their family home? Perhaps Spanish citizenship will be an option for some, but surely logic dictates that the others will also be catered for?
What happens if there is no Brexit?
So, what if the UK negotiates a Brexit that has a far less noticeable impact on our relationship with the EU? What if the Westminster Parliament decides to keep the UK in the EU, as controversial a proposition as that may seem? Which changes can we expect then? How will they affect our love affair with Spain? The truth is that we have not a clue. Policies change constantly and with those changes the corresponding legislation is amended to suit our varying economic and political needs. If we look back less than a decade we can see considerable differences in the way that Spain dealt with European nationals, Brits included. We may argue that Spain, its government and its courts have been shoved kicking and shouting into that position.
To calm our nerves we may choose to believe that a Spain that depends to such a large extent on tourism and foreign investment along its coastline, will bend over backwards to develop policies and enter into agreements that keep us Brits coming to spend our beloved Pound Sterling, whether that be on the “costas” during the holiday periods, or in the property market and beyond as retirees. It seems that we will have to be patient until at least February 2017, or perhaps even later, until we can stop asking questions and begin to feel more certain about the future complexion of what will certainly be our on going romance with Spain and all that is Spanish.