Brexit Implications For Buying & Selling Property
Updated: Jun 17, 2021
Brexit has obviously led to some key changes, such as, freedom of movement and customs. The good news is for those who are hoping to purchase a property in Spain, Bx has had very little impact here.
Residential Property Ownership Rights
Property Ownership rights are protected by the United Nations Universal Declaration Of Human Rights and the European Convention Of 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 properties in Spain, as they did before. Nationality generally does not affect the costs involved either.
Capital Gains Taxes
If you are resident in Spain when selling a 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 EEU countries with tax agreement with Spain) also benefit. Unfortunately, this no longer applies to UK residents.
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.
it is important to familiarize yourself with all the Spanish tax implications of buying property. Be aware that becoming resident here in Spain generally makes you tax resident and liable toSpanish taxation on worldwide income, gains and wealth. Take advice on how to prepare for this and the effective tax planning opportunities available in Spain.
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 spend up to 9p days in any 180 day period without a visa - this applies across the Shenegan zone. Anyone caught staying over, 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 actually moving to Spain.
If you are buying a property, you can consider the ‘Golden Visa’ option. This is a more flexible residences option for third-country nationals who make a substantial capital investment in Spain. It provides 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 program is by buying a Spanish property worth at least €500,000. Other pathways include buying shares in a company or making a deposit in a Spanish bank for €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.
The tax rules themselves have not changed with Brexit, but there are situations where non-EU residents are charged more than EU ones, which may impact you.
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). Eitherway the rate is the same for EU and non-EU nationals.
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/EEU country. This increases to 24% if resident outside the EU/EEU.
Likewise, EU residents pay tax on ’notional rental income’ at 19% and non-EU residents at 4%. This tax is paid where you own Spanish property that is not your main home and is not currently rented out.
All information has been gathered and summarized from various sources understanding the legislation and taxation practice, in the U.K and Spain at the time of publishing this post. This may change in the future. We always advise you to seek personalized advice.