Since the end of the transition period on 31 December 2020 provided for in the withdrawal agreement, the United Kingdom is now considered a third country, causing many changes in terms of trade relations, freedom of movement and a considerable increase in bureaucracy in many other aspects.
This article attempts to address these new changes and processes that will affect British citizens who, as of January 01 2021, wish to buy a property in Spain after Brexit, wish to apply for residency, or spend short periods of time in Spain in their already purchased Spanish property.
You may be wondering if, after Brexit, you will be affected when purchasing a property in Spain. The answer is simply, no. As non-EU citizens, you have the same guarantees and rights as EU citizens.
The property conveyancing process is the same for whether you are an EU or non-EU citizen, including costs and taxes related to the process – everything remains the same. To summarise, costs will only differ depending on whether the property purchased is a new home to a developer or bank (first purchase/transfer), or if it is a resale (second purchase/transfer). It will also vary depending on the autonomous community in which you purchase your property.
For a resale property – ITP (Stamp Duty/Transfer Tax)
If, for example, you decide to buy a property in the autonomous community of Andalusia, the ITP transfer tax rate is 7% of the purchase price.
If you are buying a new property (not a resale) such as a house, villa, or apartment, you must pay 10% VAT and 1.2% Stamp Duty (AJD).
Our team of experts at Tejada Solicitors can assist you in any property purchase decision. You can also find relevant information in our guide to the costs and taxes associated with buying a property in Spain.
Reinvestment exemption for the sale of your primary residence abroad
The V2910-21 tax consultation published on November 18, 2021, states that when an expat (who had an abroad residence) acquires tax residence for the current period (in Spain, the calendar year) can exempt their capital gains from Spanish taxation from the sale of their property.
This only happens when it’s a reinvestment: their primary residence is outside of Spain, and a new home has been bought, also abroad (right after the property transfer or in any of the following two years).
Tax agencies verify these types of exemption thoroughly, so Rosana Tejada, a tax advisor at Tejada Solicitors Law, advises that to ensure a more significant tax saving, you should plan everything cautiously and follow every rule that’s outlined for the standard tax. You can learn more about this exemption here.
Capital Gains Tax remains the same after Brexit
Capital Gains Tax will remain the same, or will not affect you. For both EU and non-EU citizens, the tax rate on Capital Gains from the sale of a property in Spain is the same, remaining at 19%.
The downpayment of Capital Gains Tax corresponding to the property seller (unless the buyer becomes a substitute) that must be paid to the Tax Agency in Spain will continue to be at 3% of the purchase price.
If you are thinking of selling a property in Spain, we recommend that you read our guide on the costs of selling a property in Spain, or alternatively, you can contact our team directly at Tejada Solicitors for advice.
What if you buy a house in Spain to rent it out as a holiday rental?
British citizens are important investors for Spain; many of the properties purchased are destined for tourist rental, especially in highly demanded areas of the Costa del Sol, such as Malaga, Marbella, Nerja, or Mijas, which tend to be favourites for the British.
Both Spanish, European and third-country nationals who own a property in Spain, or wish to buy a new property, are affected by the existing regional rules that regulate the obligation to register their property as a tourist property before offering it for rent.
In regards to the Autonomous Community of Andalusia since 12 May 2016, all tourist homes in Andalusia that are regularly rented for periods of less than 2 months must be registered with the Registry of Tourism of Andalusia. You can read more about this procedure in our article on urban property registration.
Taxes for renting out my house in Spain after Brexit
Due to Brexit, there will be an increase in taxation on any income received by UK citizens from the renting of any Spanish property.
From 01 January 2021, non-resident British citizens who own a property in Spain and rent out the property will incur an increase of tax on Rental Income (IRNR) from 19%, to 24%, and will not be able to deduct rental expenses. This means that they will be taxed on their gross income, producing an increase in taxation due to an increase in both tax rate and the gross amount to declare (before Brexit, non-residents only had to declare their net rental income).
Our Tejada Solicitors’ advisor, Rosana Tejada, advises that, before offering your property for rent, you should take into account all of the costs and taxes involved, to understand whether the rental option will be profitable. Here is an example:
A UK citizen who owns a property in Malaga has decided to rent out their property between May and September, receiving a monthly rental income of €1,500 (1,500 x 5 = 7,500 euros). The expenses incurred during this rental period (repairs, mortgage/loan repayment, community fees, IBI etc.) are €1,580. The taxation will be as follows:
If you would like advice on taxes for renting a house in Spain after Brexit, contact us and we will be happy to help you.
Will I need a visa if I want to travel to Spain for short periods of time?
The answer is no. From January 01 2021, British nationals wishing to visit or spend short periods of time in Spain will not need a visa to travel to Spain, as long as their stay does not exceed 90 days within a 180 day period. These 90 days can be spent as one long stay or multiple short stays.
Do not forget that in order to enter Spain, you must be in possession of a valid passport or travel documents. The documents must be valid for at least 3 months after your intended date of departure from the territory of the Member States and must have been issued within the previous ten years.
British nationals may also be required to provide evidence of sufficient economic means to cover their stay in Spain, as are any travellers originating from countries outside of the European Union.
More information and recommendations from the British government can be found in the following link: Foreign travel advice.
What about inheritance tax for UK citizens after Brexit?
Nothing will change regarding the form and the rate of Spanish inheritance tax for British citizens from 01 January 2021. This is due to the Supreme Court Ruling [SC 19-02-2018 and 22-03-2018] which declares that non-EU residents should not be discriminated against and could benefit from the tax reductions and rebates approved in each autonomous community.
For the case of Andalusia, a 99% allowance has been added for assets worth over 1 million euros, under the new decree 1/2019 passed on 11 April by the Andalusian government. This means that inheritance tax has almost been abolished in Andalusia.
As this tax is assigned to the autonomous communities, it often undergoes many regulatory changes caused by changes in government. For this reason, the team at Tejada Solicitors highlight the importance of planning to save taxes in time – in the following link you can find more information on inheritance tax in Andalusia.
If you have decided to buy a house in Spain after Brexit and you also want to obtain Spanish residency from January 2021, the following are some of the procedures you will have to follow:
At Tejada Solicitors, we must emphasise the importance of updating information as there are many regulatory changes that are occurring in Spain often caused by changes in the central or regional government(s). Only good planning will help you to save for taxes if you have been informed on time.