Brexit: tax on lets

Whatever the authorities do about taxation on lettings will have zero affect on those who declare nothing, and there are plenty of them. It is quite amazing how only friends and family visit as none paying guests.

Roberto.  I understood that the property market would take the hit in that people are unlikely to buy either with intention of making an income from letting or if they needed to let to help with running cost of have a holiday apartment. Being taxed as a non EU National there is not enough income to make it worthwhile     
 

Even with the allowances for an EU National my son for seven years has allowed a friend to live rent free in one of the two apartments he owns in spain, as the aggravation of letting was not worth letting.  I would think that with the drop in net income it will mean a lot of people will feel as he does. 

As you will be aware, with UK nationals becoming non EU, it will mean that inheritance tax on assets, property etc will mean the inheritors who are not EU nationals ( brits) will start paying tax on inheritances after 18,000 euros again and not after 1 million euros as EU nationals enjoy.  Another reason for not buying at all. 

This message was last edited by johnzx on 15/02/2020.

There are only 3 options.

1, Don’t buy in Spain because of the taxation and agro.

2, Take the risk and declare nothing.

3, Pay and make nothing.

You have to remember that part of a government’s duty is the distribution of wealth. That means taking from the have’s and giving to the have not’s to buy votes.

For those who think Brexit will make very little difference to letting income.

The maths on letting before and after Brexit

Info from https://www.gosimpletax.com/blog/brexit-impact-on-landlords/

EU national

Annual gross income  8,000

Allowable expenses    6,000

19% tax on 2,000           380

Net income                 1,620

Non EU national (brit after Brexit)

Annual gross income     8,000

24%  on 8000                 1,920

Expenses                        6,000                 

Total outgoings               7,920

Net income                        80

A bit of a shock for the  `Place in the Sun´ types if they are British who think if they buy a holiday home it will pay for itself or even make a profit, if they let while they are not using it.

There is also the situation to remain aware of that there is now the option for a 3/5 majority vote of community owners to ban renters if they so choose.
Also that debts owed to communities from unsold repossessed properties on developments have led to increases in outgoings (community fees) until such time as those properties are sold, which in several communities can be several years down the line.

Basically the need for close scrutiny to rental contracts and purchase contracts alike by independent respected legal professionals becomes essential given all manner of changes, some of which relate to Brexit and some do not.

Unfortunately many find out these realities far too late in the day given the lack of information provided to some prospective purchasers or renters, hence the ongoing need to highlight realities on forums such as EOS, until such time as the real estate professionals and conveyancing firms and media consistently advise of such realities.

But the irony also is that all of the above is no excuse for purposeful evasion of tax on both sides of the channel, (as Acer described as " freeloaders" on another thread), that do all too many a disservice in that process. Hence the desire to find a mutually acceptable system where necessary data is shared to minimise the opportunity to freeload in the first place!

This message was last edited by ads on 16/02/2020.

John or anyone

If you are a Spanish resident are your personal tax allowances used when calculating rental income tax.

There was presentation on Talk Radio España today given by a Marbella lawyer.   This is an email I sent prior to the broadcast.  The lawyer confirmed that my email described the situation correctly 

THE EMAIL:-   I was thinking maybe you would like to say something about the change in the tax rate for UK nationals after 31^st December 2020, when the rate increases from 19% to 24%.   However, that is not the end of the bad news. 

After that date UK nationals who let property in Spain will not be able to offset expenses and running costs, including electricity, gas, water, community fees, agents commission & fees (IVA maybe) insurance, paying for quarterly tax returns,  cleaning services, laundry,  wear and tear, replacement furniture and fittings, etc.

Here is an example, although the expenses I have shown might be a bit higher that most would experience

Examples

EU national

Annual gross income  8,000

Allowable expenses    6,000

19% taxon 2,000             380

Net profit                      1,620

Non EU national

Annual gross income   8,000

24%  0n 8000                1,920

Expenses                        6,000                  

Total out goings            7,920

Net income                        80

And even that is not all the bad. 

As you will be aware, with UK nationals becoming non EU, it will mean that inheritance tax on assets, property etc. will mean the inheritors who are not EU nationals ( brits) will start paying tax on inheritances after 18,000 euros again and not after 1 million euros as EU nationals enjoy. 

Another reason for not buying at all.

This type of behaviour is racist and a disgrace to the EU.

ohn or anyone

If you are a Spanish resident are your personal tax allowances used when calculating rental income tax.

I have no reason to believe that everyone is not treated the same in taxation in spain.  Ones situation dictates what applies.   Thus, if one is tax resident in spain, whether they are Spanish or not,  they are taxed under the same regulations.  If they are non tax resident then no matter if they are Spanish or not, again the same rules apply. A non tax resident Spaniard must make the same declaration and is subject to the same rules as any other non tax resident in the same circumstances. 

Non EU nationals who are non tax resident in spain are treated according to the regulations.  It is probable U.K. nationals will be subject to those regulations after 31st Dec 2020.  That is they will be subjected to the same regulations that apply to that group now. It is not descrimination. It is that U.K. nationals, by Brexit, have chosen to be in that situation, albeit it seems some think as Brits they should have special status !

I have found that often problems are misunderstood and then misreported. That can lead to people believing they are treated illegally differently when in fact they are not.  

This message was last edited by johnzx on 28/02/2020.

johnzx is correct.  There are two sets of rules of Personal Income Tax in Spain.  One set applies to Spanish tax residents (regardless of nationality) and the other set applies to non-residents (again regardless of nationality.  This second set naturally apply to Spanish nationals who are not tax residents of Spain.  Tax residency in any given year is obtainedk by spending in Spain more than 183 days.

The exception to this rule is that the EU ruled some years back that nationals of another EU country had to be treated under the same set of rules as tax residents even if they were non-resident precisely under the non-discrimination principle.

Therefore, UK nationals whether they were tax resident in Spain or not were taxed under the same set of rules which includes, among other items,  lower capital gains tax rates, possibility of deducting certain expenses from rental income which other non-tax residents do not enjoy.  However, once UK nationals are not considered EU nationals, they will go back to being taxed as any other non-tax resident (for example US nationals and nationals of most countries on earth that receive income from Spanish sources).  This is not discriminating UK nationals but rather treating them the same way as any other non-EU national that obtains income from Spanish sources.

Just to complicate things a bit more, to complete the tax treatment of a non-tax resident of Spain, there might be a Double Tax Treaty signed between Spain and his country of tax residence (not necessarily his nationality but his tax residency) that might change or affect some of the rules.  This has also to be taken into consideration.

I hope this helps to clarify the reason why the tax treatment of UK nationals who obtain income from Spanish sources without being tax residents of Spain, will change once the UK is out of the EU unless Spain decides to modify the rules. I would be very surprised if this change takes place.

If you are tax resident in Spain you will be liable to letting/rental Spainish taxation as laid down by all Spanish tax authorities, this incules all the government and the tax authorities. Why become a tax resident in Spain if you have an issue or object? If you are a none resident and object to the Spanish tax rules, why buy a property in Spain.

 You're right, of course. But I think the point of this thread is not an objection to Spanish taxation rules, rather an observation of just one the many negative impacts of Brexit on UK citizens in Europe, which, I hasten to add, are inexplicably being reported by some now as if they were unexpected.