Published 19th December 2019
UK based owners of property situated in the EU may pay higher taxes after Brexit.
Several EU countries charge higher rates of tax to non-EU residents and after Brexit everyone living in the UK will fall into that category. For example, the Spanish rate of income tax on rentals will jump from 19% to 24% immediately Britain leaves the EU. On top of that, under Spanish law it will be the gross rent that is taxed with no allowances for expenses. A UK citizen who has lived in his/her Spanish property may also lose exemption from Spanish Capital Gains Tax when selling a former home, if the replacement is not purchased within the EU.
As an example, consider a UK resident who owns property in Spain that is rented out. In our example, the property generates rents of £20,000 p.a. and there are expenses of £10,000 p.a. (but no mortgage). In Spain, the tax will become £4,800 and in the UK £2,000 (for a basic rate taxpayer). The UK/Spain Tax Treaty allows the Spanish tax to be offset against the UK tax, but only up to a maximum of the UK tax (£2,000).
If you are UK resident and have property abroad, you should take advice in the country where your property is situated to see how the changes in the local tax rules will affect you after Brexit.
For advice on UK tax and on the Tax Treaties contact us - experts for sixteen years in the taxation of income and gains from property.
The information contained in this newsletter is believed to be correct at the time of publication. The content of this newsletter is intended to be a brief summary of the principal points of the legislation or proposed legislation only, and it is provided for general guidance only. It may not take into account subsequent changes in the law and of necessity it omits much detail. Taxation is a complicated subject and is subject to change. You should only rely on advice prepared specifically for you. Neither the writer nor Landlords Tax Services Ltd can be held liable for any loss arising from any act or omission by you as a result of your understanding of this article. If the subject matter is of interest you should contact us to see if there is a relevant update, and to take professional advice which takes into account your circumstances.
Landlords Tax Services Ltd, specialises in the taxation of residential property income and gains and more than half its clients are resident outside the UK. If you would like specialist help contact Maurice Patry F.C.A .at firstname.lastname@example.org or for more information visit our website at Landlords Tax Services Ltd.
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