Holiday Home Costs Increase for British post Brexit

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Posted and filed under Brexit and Spain, Taxes in Spain.

Holidayhomecosts

Some people have asked us if their holiday home costs may increase post Brexit, if it takes place on the 31st January 2020. Currently, yes they will. Many people do not realise this, so we think it important to inform you. Firstly, non resident taxation:-

Non Resident Taxation

One tax that is likely to increase if the UK leaves the EU without a Withdrawal Agreement in place covering this is the amount of non resident tax you pay. This is the tax by all property owners for having a holiday home in Spain, payable by December 31st for the year previously.

The rate currently that you pay as a resident of a EU country is 19% a year (so for 2020 you will pay the same amount as previously, as the UK has not left the EU in 2019).

New Tax

However if no new agreement is made to retain the same benefit, such as with Norway (they are not a member of the EU). The rate for non-residents for non-EU countries is a punative 24% currently (except Norway). Then the tax will increase to 24% (or possibly more) for UK citizens for 2021. It needs a similar agreement to Norway guaranteeing the lower rate. Or holiday home costs may increase for British post Brexit, certainly for the non-resident tax or imputed income tax.

Rental Tax

In addition to non resident tax, holiday home owners renting out their property pay rental tax in Spain. An important point is that non EU citizens are not able to deduct expenses from their rental income as the British are able to now.

That means that a lot of current expenses cannot be used to mitigate tax. Items such as yearly property expenses proportioned for the time that the property is let, professional fees deducted (with an invoice). Also key holding fees, internet/TV bills, etc. Nothing is able to be deducted for non European citizens.

Also the rate applicable will be 24% again instead of also 19%. But this rate applies immediately this year whem the UK is no longer part of the EU. Thus it is expected that after January 31st 2020, immediately this quarter, British holiday home owners who let out their homes will be worse off in terms of their rental income, as holiday home costs increase for British post Brexit. Please contact us if you would like any assistance with regard to payment of non resident tax or other issues.

46 Comments

  • Paul Macfarland

    can i ask what tax i will have to pay if i do not rent my property out

    • Nicola Ryan

      Good Afternoon Paul,

      If you are non-resident and own a property in Spain, you are liable for “non-residents tax”. If you are resident you are liable to submit your yearly tax return (renta), we hope this helps.

      Kind regards
      Nicola

  • Michael Stevenson

    What will the IRNR tax be for Irish citizens holding an Irish passport though residing in Northern Ireland

    • Amanda Thomas

      Dear Michael, I am sorry, please contact Ana office@spanishsolutions.net and explain a little further the nature of your enquiry regarding taxes. If it is for non resident tax she needs your deeds and IBI/suma bill to calculate Kind regards.

  • Peter Duckett

    My wife has an irish passport but is tax resident in the UK. Can she claim expenses as an EU citizen against the property?

    • Amanda Thomas

      Dear Peter, There are certain expenses that can be claimed, please contact your accountant for further info as is a UK matter. Kind regards

  • John Sweeney

    I live in the UK (Northern Ireland) but have an Irish passport, so still an EU citizen. So can I apply the 19% when calculating the non resident tax? I had a UK passport when I registered for NIE.

    • Jane

      Hi John

      If you have an Irish passport now you would require to get a new NIE with this passport, you will be considered as British and the rate on the calculation will be 24% until you do this.

      Kind Regards

      Jane

  • Jason

    Can I set up a European company for my rental property in Spain, and use the 2020 19% tax rules plus deduct expenses under the old system post brexit?

    • Jane

      Hi Jason

      Yes, if the rentals are managed by a European company, the tax will remain 19% and you can deduct expenses.

      Kind Regards

      Jane

  • Robert Cheshire

    Can I ask if the agents fee (the agent holds the licence for the property rental ) is deductible from the rental income now we are no longer part of the EU

    • Jane

      Hi Robert

      Unfortunately not and also the amount of tax will also increase from the 1st quarter 2021 the UK citizens have to pay the 24% (19% was previously) from all their rental income.

      Kind Regards

      Jane

  • John Sweeney

    Just as a follow up to Jane’s reply on January 11th – I am being told by the local officials that once an NIE is issued, that’s it for life. I am not entitled to a new one. Also, as my Fiscal address is Northern Ireland, although I am an EU citizen with an Irish passport, I will have to pay 24% on non-resident’s tax.

    • Jane

      Hi John

      You are residents in the UK, and were British when you got the NIE, so would have to pay 24%. You should have the option to change NIE to Irish, keeping the same number. We were not aware your address was in NI, as it is the country of Residency that accounts for tax purposes.

      Kind Regards

      Jane

  • Nick Smyth

    Hi Jane

    Like John, I live in Northern Ireland and do hold an Irish Passport. My NIE number is linked to this passport. My question is will I get the reduced 19% tax rate with the ability to offset expenses even if by living in Northern Ireland the UK is where I pay tax? That is, is the tax rate based on the fact that I am an EU citizen OR where I pay taxes?

    Thanks for your help
    Nick

    • Jane

      Hi Nick

      As a UK Tax resident you will pay the Non EU rate, sorry.

      Kind Regards

      Jane

  • Nicola

    Hi. If I move to Spain as a non eu citizen and want to start a business renting my house as a holiday home What tax would I pay and am I classed as self employed. In that case what visa would I apply for. Thank you

  • Tracey Fry

    Hello, we bought a holiday home in Spain in September 2020. We are are classed as non residents as we live in the U.K. We bought this as a holiday home only and will not be letting it out.
    When would we have to pay the non residents tax, I believe it is now set at 24% of the Castoral value. The Form being Modelo 720? Would we have to pay by the end of December 2021? And is the 24% split between myself and my husband, i.e. we have to pay 12% each as we have are both named on our spanish mortgage?

    • Nicola Ryan

      Good Morning Tracey,

      Thank you for your enquiry.

      As you bought your property in September 2020, you need to pay the non-resident tax for the year 2020 (from September to December only), this is due to be paid in December 2021, the rate is still 19%. Next year you will have to pay the Non-Resident tax for the year 2021, for the full year, the rate will be 24%. Each owner has to pay their non-residents tax, you will pay 12% each. We hope this helps.

      Kind regards
      Nicola

  • Kate B

    Good evening,
    What classifies as a Holiday rental? If I would like to rent out my apartment on a long term lease is it still subject to the same 24% ?
    Thank you

    • Nicola Ryan

      Afternoon Kate,

      Thank you for your enquiry.

      A holiday lease would be for short rentals, possibly up to 2 or 3 weeks. In this cas a tourist licence would be needed. If you decide on a long term rental, you would only require a rental contract, we can assist you with both of these products, should you need any assistance.

      If you are a non-resident, you would be liable to pay 24% on holiday rentals and long term rentals. We hope this helps.

      Kind regards
      Nicola

  • alain NOZAHIC

    Good evening
    I had a Spanish property under a uk company, I am French and resident in UK at the moment, I want to know if I need to pay 24% tax now.
    My NIE number is under French nationality.
    My uk company have a Spanish number also.

    If your answer is yes, can I open a holding company in Europe who will manage via uk and spain the house for rent and in this case I will only pay 19%

    Best regards

    • Tracie Miles

      Good afternoon Alain
      My colleague Ana will email you under separate cover regarding your enquiry.
      Kind regards
      Tracie

  • Andrew Shaw

    Hi i am English living in England, I’m looking into buying a holiday home in Spain and it will be managed by a local Spanish property agent, do i pay 19% or 24% tax and can any expenses be claimed
    Thanks

    • Tracie Miles

      Good morning Andrew
      Thank you for your enquiry. The taxes will be 24%.
      If you need assistance with the purchase of a property in our area we would be more than happy to assist you. We can also assist with legal representation if you so wish.

      Kind regards
      Tracie

  • Eugene

    Hello, I Iam an Italian citizen with a house in Granada, I was resident in spain but have now moved my fiscal residence in Switzerland where I work now. I rent out the house to fixed tenants and booking. I was surprised to find out Switzerland does not apply for the 19% and thus I will be charged 24% with no deductions, which is absurd. I looked into usufructo for third parties, which is still an option, but you need to have it in a non parent’s name else you will still have a minimal income presumed, at 2% of Valor Cadastral . It is also complex legally and requires a notary. Can you explain how a European company might solve this issue?

    • Nicola Ryan

      Good Morning Eugene,

      Thank you for your enquiry.

      You would need to appoint a Solicitor in your area, who would deal with the usufruct, Notary ect on your behalf. We hope this helps.

      Kind regards
      Nicola

  • Neelesh Bhojani

    Hi I recently purchased a property in Spain and completed at the end of Sept 2020. My intention is to rent the property during the peak months and then use the property the remainder of the time. Recognising that none of the costs I incur will be deductible and that I will pay 24% tax in Spain. I still need to declare this rental income in the UK as I am a higher rate tax payer. Would I be able to deduct those expenses (supported by invoices etc.) within my UK self assessment?

    • Nicola Ryan

      Good Morning Neelesh,

      Thank you for your enquiry.

      Yes, you would need to ask your UK accountant, if you can deduct the 24 % rental tax you have to pay in Spain every quarter and the fees. We hope this helps.

      Kind regards
      Nicola

  • Nicola Mercer

    I am looking to purchase a holiday home in Spain that would be rented out for the majority of the year, depending on demand. I’m a little confused about what I am paying tax on. Would I only be paying tax in Spain @24% of the total income from the rentals? I’ve understood that no expenses are deductible (like in the UK) – is this correct? And that I don’t have to declare the income and pay further tax on it in the UK – is this correct? Thanks

    • Ian C.

      Hello Nicola,

      Good news to hear that you are getting involved in the property business here in Spain.
      We are seeing a huge uplift in the number of people travelling to Spain now that restrictions are greatly reduced.
      The answer to your question is that with the double taxation agreement between the Uk and Spain you only pay tax once. Let’s say your tax rate in the UK is 40%, you pay 24% of that here in Spain and the balance in the UK.
      Many of the expenses of owning a property in Spain are deductible- Even Spanish Solutions fees!! Our tax experts, 347 asesores, can explain how to legally deduct your expenses and make sure you pay the exact correct amount, not one euro too much, not one euro too little.
      Do you know that you cannot rent properties in certain parts of Spain?
      You need to make sure you are buying the right house, in the right area, for the right price.
      We can of course help with every aspect of buying your investment property in Spain.

      Best wishes,

      Ian

  • Norman

    Hello, I wish to close my sabadell account and move all my direct debit payment to a my wise account, also to pay suma and cumunity fees, what would be involved and how is best way to do this, I’m at a loss, thanks

    • Nicola Ryan

      Good Afternoon Norman,

      Thank you for your enquiry.

      It is important to confirm that each provider will agree to use Transferwise as a bank firstly. If they do, you need to change the bank details with each supplier.

      Should you need any assistance with this, please do not hesitate to contact us, we would be delighted to help.

      Kind regards
      Nicola

  • Angela

    Hi, I’ve been living in Spain fir 3yrs now and have a holiday home in uk, I want to sell it now but wondered if I have to declare it in my tax year for spain?

    • Nicola Ryan

      Good Morning Angela,

      Thank you for your enquiry.

      If you are resident in Spain, you would need to declare the money received from the sale of the property, when submitting your tax return. We hope this helps.

      Kind regards
      Nicola

  • Colin

    My wife and I own 2 Spanish properties with a gross income of circa 22,000 Euro.
    For UK tax purposes there is little profit because of mortgage interest and other overheads, however we are now facing a 5,280 Euro tax bill.
    I was born in Northern Ireland and have applied for my Irish passport in May (still waiting) and my wife is british. We both live in Northern Ireland and pay UK tax.
    Based on previous answers, there does not seem to be any scope for tax reduction based on my citizenship but I noticed a few references to the possibility of running the properties through a european company and wanted to see if this is a viable option?

    • Tracie Miles

      Good morning Colin

      Thank you for contacting us. My colleague will email you under separate cover regarding your enquiry.

  • Hazel

    I’m a UK citizen but I currently live in Spain in an apartment I bought with a Spanish mortgage. I’m thinking of moving back to the UK. I don’t own property in the UK but would like to use the money from my Spanish property to buy in the UK. What taxes would I be liable to pay?

    • Nicola Ryan

      Morning Hazel,

      Can we ask where you live in Spain please.

      Taxes to be paid depend if you are resident or non resident. Non resident sellers have to pay a 3% tax based on the total price agreed with the buy. Sometimes this 3% can be claimed back after completion. It depends if you have made any profit on the sale.

      There is also a tax called plusvalia to be paid to the town hall, this tax is paid by all (sellers, residents and non residents). It is based on the increase of the land value every year and can be calculated with a copy of your council tax bill.

      Should you need any assistance with the sale of your property, or any other matter, please do not hesitate to contact us.

      Kind regards
      Nicola

  • jonah hull

    Hello, can you advise on whether and how it might be possible to deal with the rentals on my Spanish property through a European company in order to avoid Brexit-induced 3rd country tax rates? I live in the Uk and am a UK citizen.

    • Nicola Ryan

      Morning Jonah,

      Thank you for your enquiry.

      Can we ask the name on the title deeds please.

      If you are the name on the title deeds, you would need to set up an EU company, transfer the property into the company name (pay the land registry fee, Notary fees and pay taxes) in order to have the reduced rate of rental tax. This process alone would cost you much, much more than what you would pay in the higher tax band.

      Should you wish to investigate this further, our fiscal advisor Rafa can offer a tax consultation where he would discuss the setting up of the company, taxes to be paid ect. Should you wish to proceed with any tax services the consultation fee paid would be offset against the cost.

      Should you wish to proceed or have any further queries, please do not hesitate to contact us.
      Kind regards
      Nicola

  • Dean

    I am a UK resident looking to buy a holiday apt in Spain. For one particular property I have been advised that it is unlikely a Tourist License will be granted so I would not be able to rent it out. Do I still have to pay the 24% Rental Tax? I have been told I do but that seems wrong given that the authorities won’t allow me to rent out my property! Can you advise further?
    Thanks

    • Nicola Ryan

      Thank you for your enquiry Dean,

      We would need to know why the property would not obtain the tourist licence, if it is because it is situated on rustic land, a casa rural licence would be needed instead of the tourist licence. Also where is the property, it is forbidden in some areas to rent the property out without the relevant licences and the fines are high.

      We look forward to your reply
      Nicola

  • Carl-Oscar Westerlund

    I am a EU citizen currently residing in the UK. I am looking to purchase a rental property in Spain. Should I understand the article above as; (1) I will have to pay 24% tax on the rental income (based on my current UK residency), but (2) I will be able to deduct certain expenses against the rental income and only pay the mentioned tax rate on the profit rather than total gross rent (based on my EU citizenship)? Thank you!

    • Nicola Ryan

      Thank you for your enquiry Carl,

      If you are a UK fiscal resident, you would not be able to deduct any expenses as the UK are no longer part of the EU. If you are a fiscal resident in an EU country, you can deduct expenses. We hope this helps.

      Nicola

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