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.

18 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

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