Has Brexit changed anything for UK citizens who own a Spanish holiday home or other property? Make sure you’re aware of the potential legal, residence and tax issues.
While Brexit has led to some key changes, such as to freedom of movement and customs, the good news for those hoping to buy or sell property in Spain is that Brexit has had little impact here.
Residential property ownership rights in the EU
Property ownership rights are protected by the United Nations Universal Declaration of Human Rights and the European Convention on Human Rights and must be respected by EU member states. Nothing in the rules about owning property, renting, taxation or shared ownership has changed as a result of Brexit.
UK nationals can continue to buy property in Spain, as they did before. Nationality generally does not affect the costs involved either.
Spanish residence rights and visas
Owning property, however, does not automatically give you residence rights in Spain and Britons have lost the freedom of movement they enjoyed before Brexit. You will need to apply for a residence visa or restrict the time you spend in Spain.
As a ‘third country’ visitor, UK nationals can now only spend up to 90 days in any 180-day period without a visa – and this applies across the Schengen zone.
Anyone caught overstaying could risk deportation, fines and a record in their passport that can complicate future travel and visa applications.
Britons can still apply for residence in Spain, whether through a work or ‘non-lucrative’ visa. However, the process has changed and involves more paperwork and conditions – and you need to apply before moving to Spain.
Spain’s Golden Visa
Since you are buying a property, you can consider the ‘Golden Visa’ option in Spain. This is a more flexible residence option for third-country nationals who make a substantial capital investment in Spain. It provides the freedom to come and go as you wish, including access to public services, without having to become fully resident.
The most common way to qualify for this programme is by buying Spanish property worth at least €500,000. Other pathways include buying shares in a company or making a deposit in a Spanish bank of €1 million+.
This Golden Visa option is attracting relatively wealthy foreign nationals to Spain, which will prove important in Spain’s post-covid economic recovery and benefit the property market.
Download our guide to Spain’s Golden Visa
Taxation in Spain
The tax rules themselves have not changed with Brexit, but there are situations were non-EU residents are charged more than EU ones, which may impact you.
Spanish taxes on property transfers
When buying a property in Spain you will either pay IVA (VAT) if it is a new build, or ITP (stamp duty). Either way, the rate is the same for EU and non-EU nationals.
Capital gains tax in Spain
If you are resident in Spain when selling property, the gain is taxed at progressive rates from 19% to 26%. Non-residents pay a flat 19%, regardless of which country they live in.
When you sell a property that qualifies as your main home and use the proceeds to buy another main home, you may benefit from reinvestment relief and be exempt from tax. Prior to 2015 this only applied to Spanish residents, but now residents of EU countries (or EEA countries with a tax agreement with Spain) also benefit. Unfortunately, this no longer applies to UK residents.
Spanish income tax
Brexit has had an impact here.
A non-resident is taxed in Spain on income arising from Spanish property (rental income) at the flat rate of 19%… if they are tax resident within an EU/EEA country. This increases to 24% if resident outside the EU/EEA.
Likewise EU residents pay tax on ‘notional rental income’ at 19% and non-EU residents at 24%. This tax is paid where you own Spanish property that is not your main home and is not currently rented out.
Spanish succession tax
In 2018 the Spanish supreme court ruled that Spain’s succession tax rules must apply to all non-residents, even if they live outside the EU. This involved a Canadian citizen, but was good timing for Britons with Brexit coming up as they should continue to benefit from the improved tax rates and allowances provided by the local autonomous region.
Download our guide to Spanish taxes
Other tax considerations
It is important to familiarise yourself with all the Spanish tax implications of buying property. Be aware that becoming resident in Spain generally makes you tax resident and liable to Spanish taxation on worldwide income, gains and wealth. Take advice on how to prepare for this and the effective tax planning opportunities available in Spain.
Contact a Spain-based Blevins Franks adviser