For tax professionals, the idea of escaping to some Spanish sun in January is a pipe dream, even in non-Covid times, as we grapple with the personal tax return submission deadline.
And with Spain on the brain, we are advising clients to be aware of changes to EU tax liabilities, due to Brexit. UK residents with a second home in Spain will find that Spanish tax liabilities have increased:
- As the UK is no longer part of the EU, then any rental income will be:
- Taxed in Spain at 24%, rather than the existing 19%.
- The Spanish tax will be calculated on the gross rents with no deductions allowed for expenses, such as community fees.
- It should be noted that apparently there is a rule in Spain whereby second homes are deemed to generate rent equal to 1.1% to 2% of the rateable value of the property. This deemed rental income is also taxable at 24% for non-EU residents instead of 19%.
- Capital gains tax on the sale of the property will remain taxable at 19%
- Owners who are aged over 65, and who have lived in the property as their main home for at least three years, will still benefit from a full exemption from capital gains tax on the sale.
- Under 65s can claim exemption from capital gains tax if they acquire a new home within the EU or EEA. As the UK is no longer part of the EU or EEA, then, going forward, there will be no exemption where the replacement home is located in the UK.
- Any Spanish tax paid should be available to be set against any equivalent UK tax liability.
It is possible that the taxation position for UK nationals will change in other EU countries as well, so we recommend taking advice from a local specialist.
As Robson Laidler are members of the UK200Group we have access to specialised accounting and taxation professionals worldwide and are pleased to help our clients navigate through the changed rules.
As this is a complex issue, please seek professional advice before taking any action based on the contents of this blog post.