How will Brexit impact upon the Brits living in Spain? How will it affect the ownership of Spanish property? Will I still be able to have health care in Spain? Will I still be able to live in Spain? What happens with tax?
These are just some of the pressing questions that may be taxing the mind of those Brits who have, so far, enjoyed the benefits of living in Spain, whilst being a member of the European Union. Javier Jurado, Registered European Lawyer and Spanish Abogado of Nockolds Solicitors, deals with some of these questions.
1. Stay Calm
The first thing is to stay calm. There will be no significant changes until the UK formally apply to withdraw from the Union in accordance with Article 50 of the Treaty on European Union. Then, the EU regulations applicable to UK would become annulled within two years of the withdrawal notification, although this period can be extended if both parties agreed to do so.
This means that Article 50 needs to be invoked by the British Government before the exit procedure can be started. This will not happen until a new PM is in situ, probably around September/October, and then it will take about two years until the EU laws are no longer applicable. This should give time for things to settle down, and for both Spain and the UK to start negotiating the future relation between both countries.
There are lots of British people living in Spain, and whilst Spain has its own uncertainties with its General Election this Sunday 26 June 2016, it will be naïve to think that the out come of the EU referendum was not as important to Spain as it is to Britain, especially when we consider the revenue that the British residents produce in Spain. Therefore, there is going to be no change in the immediate future.
2. The Ownership of Spanish Property
If you are thinking of purchasing property in Spain, the first point to clarify is that the conveyance process is exactly the same regardless the nationality and/or the residency of the buyer. It is irrelevant whether the buyers are from Spain, from any EU member estate or from any other country in the world as well as it is irrelevant their place of residency. Hence, Brexit will have absolutely no impact on this.
The payment of taxes when purchasing property in Spain exclusively depends on whether the buyer is acquiring a resale or an off-plan property. If it is resale, the obligation will be the purchase tax set out by the local government where the property is located; and if it is off-plan, the VAT and the stamp duty. It is also worth noting that the rights of the owner over the property are based on the legal ownership, not on the nationality and/or the residency.
The major point to be considered when the UK comes out the EU will be the right of free passage and residence. The implication is that any British property owner who would like to spend more than three continued months in Spain will need to apply for a Visa. Other secondary aspects may include the additional difficulty to obtain finance from Spanish banks or even to open a bank account with them.
In the interim there may be an impact on the price of property in Spain. This is beyond our remit but it is sensible to note that a lower Pound will mean the actual price paid is higher, although selling property and receiving Euros now could result in a benefit for the sellers so it is swings and roundabouts.
3. The Effects on the Payment of Taxes
The ownership of property in Spain requires the submission of annual tax returns known as “Renta de no residentes
” that are based on the rateable value of the property or the rental income received during the financial year, if any. The percentages used to calculate these tax payments vary depending on the condition of EU national (19%) or non EU national of the property owners (24%). Therefore an immediate effect could be an increase in taxation.
There could also be some implications in relation to the Inheritance Tax. The European Court recently ruled that Spain was applying a discriminatory regime to EU nationals who inherited assets in Spain but were no tax residents in Spain. As a result of that, EU nationals are now treated as Spanish nationals, either if they are resident in Spain for tax purposes or not.
In addition, any Brit who may have overpaid Inheritance Tax over the last 4 years can reclaim that back. When Britain comes out of the European Union, the most direct and likely impact is going to be on the question of taxation, where Spain will be free to impose tax levels, as they do on non European members.
4. Health Care
At the moment, all Brits can get emergency and direct free healthcare in Spain by virtue of the European Health Insurance Card (EHIC). There is also protected universal access to healthcare by children and pregnant women. However there are different healthcare entitlements which will need to be renegotiated when Britain leaves the European Union:
At present, any Brits working in Spain and making national insurance contributions are entitled to the same estate health care as if they were a Spanish national. The only requirement is to be registered on the “Instituto Nacional de la Seguridad Social”.
If Over 65's
If retired and you are receiving a UK state pension, you can register for healthcare as a resident once you have been living 12 months in Spain. If you are an early retiree, or you still have not become a resident in Spain, the local governments offer special pay-in schemes by way of public health insurance in which individuals can access state-run healthcare in exchange for a monthly fee.
5. The Right to Live and Work
At the moment there is free right of movement in the European Union, so a Brit out in Spain cannot only live there but can also work there. By virtue of membership of the European Union, they can expect to be treated the same as any Spaniard. This means in terms of both employment opportunities and the private obligations such as payments of tax etc. This may eventually change when Britain comes out. The right to work and to trade will be subject to negotiations and there will be uncertainty until the UK and Spain agree the new terms of their commercial relation.
6. Residency in Spain
For those who are actually living in Spain and have permanently residing there for 5 years, one of the easiest ways to overcome any potential discriminatory treatment might be to obtain for their Spanish residency. This would allow any Brit to become a resident of Spain and have the same rights as a Spanish citizen. The main advantage is that when you are a national of any EU member estate, the application to obtain the Spanish residency is very straightforward.
7. Relocating to Britain
It may be an opportunity for those who have a tenuous link in Spain, to take the initiative and sell their property. Although there could be a glut of property on the market in Spain, if a lot of people took that view, the other side of the coin is, of course, that whilst the £ is temporarily weak, the Euro will buy more so it may be that the losses are equalled out. Terminating any contact with Spain prior to Britain coming out of Europe will, at least, provide some transparency and clarity as to the potential financial consequences if the family decide that they want to liquidate their assets in Spain and move back to the UK.
8. Spaniards in the UK
For those Spaniards who have made Britain their home and wish to stay, once the UK has come out of the European Union, they would not be able to claim the right of free passage and residence based on their European Union citizenship. It might be the time for a formal application for residency in the UK, in order that the right to stay, and work in the UK, is assured.
These are uncertain times. However, whilst there may be some short term buying and selling of property, it may be beneficial to consider the implications of such moves now to consider whether it would be better to deal with matters now rather than wait until new treaties are negotiated which would be a considerable time in the future. If you need to discuss any of these issues, have any particular concerns, then please contact Javier Jurado on 020 7294 7330 or email firstname.lastname@example.org.