Brexit and rental income tax

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kevsboredagain
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Brexit and rental income tax

Post by kevsboredagain »

I was just curious if those who live in the UK and rent out a property in Spain were aware of what will happen to the tax they pay in Spain following a Brexit.
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Lets Go To Puglia
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Post by Lets Go To Puglia »

Tax will stay in Spain, UK tax payers will get a credit for tax paid in Spain against their UK tax bill
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kevsboredagain
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Post by kevsboredagain »

Lets Go To Puglia wrote:Tax will stay in Spain, UK tax payers will get a credit for tax paid in Spain against their UK tax bill
I take it you don't know the current differences in tax rules for Spanish, EU or non EU residents?
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Post by e-richard »

IANAL

The tax credit given by the UK against tax already paid in Spain is the result of an agreement between the two tax authorities.

I believe, but could be wrong, that this agreement is not part of the EU membership, but one of many bi-lateral agreements with loads of countries, so should not be subject to any change on Brexit, unless, of course the Spanish Tax man gets the hump because we voted to leave and he withdraws the agreement.

So, similarly, if I am wrong and this reciprocal agreement is part of EU membership, then like the 798 other (trade and other) agreements that we will have to re-negotiate, this will be the subject of hundreds of flights from Newcastle to Madrid to "negotiate", and of course both Governments will need to recoup the costs of these flights from somewhere.
Guess who will pay?
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Post by CSE »

Whatever happens it will be the same for anyone from Spain living in the UK. Maybe the same for any one from with in the EU counties, who knows? Just wait a few more years until the dust has settled and the flights between Newcastle and Madrid have stopped. :wink:
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Lets Go To Puglia
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Post by Lets Go To Puglia »

e-richard wrote:IANAL

The tax credit given by the UK against tax already paid in Spain is the result of an agreement between the two tax authorities.

I believe, but could be wrong, that this agreement is not part of the EU membership, but one of many bi-lateral agreements with loads of countries, so should not be subject to any change on Brexit, unless, of course the Spanish Tax man gets the hump because we voted to leave and he withdraws the agreement.
That is my understanding too.
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kevsboredagain
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Post by kevsboredagain »

I will explain.

Spanish residents pay tax on rental profit. I don't recall the % but they can claim all expenses I believe. I've never been a Spanish resident so forgive me if this part is incorrect.

EU residents pay 19% tax on rental income with some deductions allowed. eg. cleaning and bills during the period of rental only. These deductions are fairly limited.

Non EU residents pay 24% on gross rental income. No deductions whatsoever.

The moment the UK becomes non EU, UK resident owners will be subject to these Spanish laws and have to pay 25% in Spain on gross rental income. That is exactly what happened to me when I moved from an EU country to a non EU country. The bilateral agreements indeed are nothing to do with the EU but simply mean you don't pay the tax twice. It does nothing to prevent tax discrimination by the Spanish government.
Last edited by kevsboredagain on Thu Jun 23, 2016 3:12 pm, edited 1 time in total.
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Lets Go To Puglia
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Post by Lets Go To Puglia »

kevsboredagain wrote:I will explain.

Spanish residents pay tax on rental profit. I don't recall the % but they can claim all expenses I believe. I've never been Spanish resident so forgive me if this part is incorrect.

EU residents pay 19% tax on rental income with some deductions allowed. eg. cleaning and bills during the period of rental only. These deductions are fairly limited.

Non EU residents pay 24% on gross rental income. No deductions whatsoever.

The moment the UK becomes non EU, UK resident owners will be subject to these Spanish laws and have to pay 25% in Spain on gross rental income. That is exactly what happened to me when I moved from an EU country to a non EU country. The bilateral agreements indeed are nothing to do with the EU but simply mean you don't pay the tax twice. It does nothing to prevent tax discrimination by the Spanish government.


Thanks for that. I live in Italy so pay whatever the rate is based on my total income. Starting rate is 23% and jumps fairly quickly to 27%. No expenses can be claimed, just a flat rate of 5% of rental income. As this is the same for Italians and non Italians alike I don't see Brexit leave result making any difference to me.
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Post by kevsboredagain »

Lets Go To Puglia wrote: I don't see Brexit leave result making any difference to me.
Neither do I. That's why I'm only talking about Spain.

It could also affect France one day as the government there attempted a similar move and was overruled by the EU.
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Post by kevsboredagain »

Welcome to the non EU club where you'll have to pay Spain 24% with no deductions. So ashamed to be British today.
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Post by costa-brava »

Kevsbored wrote:
"Spanish residents pay tax on rental profit. I don't recall the % but they can claim all expenses I believe."
No way Jose!! It can be worse for us depending on total income. Firstly we have the same rule about covering costs, only for the weeks booked. We have to do the imputed earnings thing for the blank weeks. Then we are taxed on a sliding scale according to total income. I have UK pensions so my rate of tax comes out over 20%.
Then I'm doubly knackered in the Brexit fiasco. I'm Scottish. So I'm a Euro-resident coming out and then maybe going back in again. It's a mess and it's going to take a couple of years at least to know where we stand.
Only one solution really. Sell up at the best price we can get. Three down and two to go. It's just not worth the hassle no-matter where you are resident.
It's not about BRexit. It's about HRexit. Get out of holiday rentals.
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Post by kevsboredagain »

costa-brava wrote:Kevsbored wrote:
"Spanish residents pay tax on rental profit. I don't recall the % but they can claim all expenses I believe."
No way Jose!! It can be worse for us depending on total income.
My appologies then about Spanish residents. I was making a assumption just on what I'd read in here but admit I've never looked into the details. I thought that all expenses would go onto your yearly return? We have to do them every 3 months.

My income in Spain is also added to the income in my own country and I'm taxed here at a rate determined by the total.
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There's a bit of drift going on in this discussion

Post by OrangeBlossom »

costa-brava wrote: Then I'm doubly knackered in the Brexit fiasco. I'm Scottish. So I'm a Euro-resident coming out and then maybe going back in again. It's a mess and it's going to take a couple of years at least to know where we stand.
Only one solution really. Sell up at the best price we can get.
I'll comment on this briefly in a moment but I want to say first that though the topic did originally have something of a focus on Spanish tax, I think that this thread and a couple of others on here should really be in the Café for or we should start a new one exclusive to Brexit issues.
Surely it would be disastrous for Spain if all UK origin rental owners took the same path as the one planned by you Costa Brava. This whole mess will probably take ten years rather than 2 to sort out, so why rush into selling and knocking the Spanish economy back yet again?
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Post by costa-brava »

I think we're OK on this thread. We are UK citizens who have been resident here since Spain entered the EEC. We are from Scotland that wants to remain in the EEC while the whole of UK is quite definitely on the way out. We live in Catalunya where they want to break away from Spain.
We have properties in the Costa Brava where the season has been getting shorter with each year. Advertising costs as a proportion of earnings have soared. Costs go up each year and we can only offset these costs in proportion to the weeks rented.
We held on year after year since the bank crisis hoping that property values would bounce back. They have not but there is at the moment a fairly buoyant market if we accept much lower prices.
Another Spanish election on Sunday failed to produce a working government.
Although we are having to accept prices well below what we paid, we still have equity on each one. In the current climate it is crazy to try to hold on.
Each person has to assess his or her own set of circumstances especially since many areas have a longer, more profitable season than us, but the fizz has gone out of the bottle and selling up was the correct decision even before Brexit.
If you know anything of the Scottish lingo you'll know what I mean when I say we're scunnered.
We still plan to live here if it all works out but we need to build in some flexibility and the hol-rents had us trapped.
I understand when you say this should be discussed in the café but it is very relevant specifically to Spain. Many people are busily trying to get their licences in place and I think some honesty is helpful. My comments are not just a disgruntled gripe. We're talking real hard economics and quality of life.
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kevsboredagain
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Post by kevsboredagain »

I have to agree with costa-brava. UK residents who own and rent Spanish property will soon see a huge increase in their tax liability without the protection of EU law and may not be able to stay in business. I would also expect property prices to crash once again due to lack of demand now from the UK, which will in turn knock the Spanish economy back down again, so soon after it was starting to recover.

Getting out now is not such a crazy option and could easily be seen as cutting your losses.
Last edited by kevsboredagain on Thu Jun 30, 2016 5:26 am, edited 1 time in total.
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