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Could Brexit affect your holiday home?

30 October 2019

Ex-Pat Tax

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Brexit conversations are the order of the day, with the populace being concerned about everything from the fate of the British High-Street to the legislation surrounding international trade. But have any given thought to the way that personal taxation could change?

Many Brits frequent the sunny shores of Spain, and many more have chosen to purchase property abroad; it is for these individuals that Brexit could bite with the way that their properties are taxed.

What will change?

Following Brexit we will lose our status as citizens of the EU and as a result the Spanish tax regulations for non-resident property owners living outside of the EU/EEA are likely to change significantly. This means that instead of receiving the more favourable non-resident income tax rates of 19% on Spanish rental income, British property owners are likely to be subject to Non-EU/EEA status rates which are currently set at 24%.

Property expenses will also be affected; currently individuals are able to take a deduction for certain expenses incurred in renting out their property, however non- EU/EEA nationals will no longer be allowed to claim this relief. This could result in a double hit on Spanish rental income with higher rental profit taxed at a higher rate.

Inheritance tax on a Spanish property may also become more onerous as British citizens lose the concessions Spain made for EU/EEA nationals following an EU Challenge at the Court of Justice of the European Union (CJEU). Furthermore, exit tax and even business dividends for Spanish based funds and property may be subject to different rules following Brexit.

Some of the changes above will be tempered by virtue of the UK/Spain double tax treaty and in other cases, the changes may not have such a significant impact depending on a UK resident individual’s overall UK tax position. However it is of vital importance that you are aware of what your new liabilities could be once Britain makes the move away from the EU.

What should I do next?

For more information we recommend getting in touch with your regular contact at James Cowper Kreston or submit an enquiry to our award winning tax team by using the form above.