BREXIT: Tax implications when buying, selling or renting properties in Spain
Since the 1st of January 2021, and once the transition period is finalized, the effects of Brexit are starting to unfold.
The most important consequence in terms of taxation, is that the general tax rate of 19% for EU residents will cease to be applicable and 24% will become applicable to British residents. This applies to tax on rental income, income from work, imputed income from real estate, etc.
However, it’s likely that one of the most important consequences of Brexit, is that UK residents who rent out their property in Spain, be it short or long term, cannot deduct expenses any more. This means that, for instance, if your tenant pays 1.000 Euros per month, you will have to pay a tax of 240 Euros. No matter whether the estate agency charged you a fee, or if you had to pay for the electricity, community fees, etc. The rental income obtained by non residents in Spain, still needs to be declared quarterly (in our example, you would have to pay 720 Euros for the quarter).
It is important to point out that the relevant fact in order to establish the tax rate and other tax conditions, is the residency and not the nationality, so it does not matter if you also hold the nationality of an EU country. If you are resident in the UK, you cannot deduct expenses any more and your tax rate is 24% instead of 19%.
The good news is that there’s no change in the taxation on the purchase and sale of properties due to Brexit, so British nationals can still buy and sell properties exactly the same as before the UK left the European Union.
There is no change either on Inheritance Tax since the decision of the Spanish Supreme court of 2018 already ruled that non residents in the EU/EEA cannot be discriminated against for this tax.
Another Brexit’s effect is that the process of applying for Spanish residency has changed substantially for those who were not already living in Spain by 31/12/2020. Now, you cannot fly to Spain as a tourist and apply for residency afterwards (unless you can apply for the Golden Visa). If you want to apply for residency, you need to do this from the UK, through the Spanish Consulate closest to your address, either London, Manchester or Edinburgh. Please keep visiting this Blog as we will be adding a new entry about applying for Spanish residency from the UK.
IMPORTANT: If you were residing in Spain before 31/12/2020, and you are able to prove this, you can still apply for your TIE. You will also have to prove that you had full medical cover in place BEFORE 01/01/2021.