From 1 January 2021, UK-based owners of Spanish real estate will suffer a 24% tax rate on income, after the previous 19% tax rate expired when the transition period ended on 31 December 2020. This is a severe increase of over a quarter, a direct result of the Brexit vote being implemented, and the UK being seen as a non-EU country.
In addition to the higher tax rate, the Spanish tax authorities will no longer permit any expenses to be deducted, meaning the gross income will be taxed. This could be a huge increase, disproportionate to any real profit made. To take a simplified example, if income of €1,000 per week was generated for six months over the holiday season, that’s gross income of €24,000 per year. If expenses of €14,000 were incurred, and ignoring any allowances, a tax bill of €1,900 would have been payable before Brexit. After Brexit, that jumps to €5,760 – three times as much.
Whether this also has an effect on the local property market, factoring in the fluctuating GBP-EUR exchange rate, remains uncertain. There will be many unexpected tax implications of Brexit – this is just one.
Would you like to know more?
If you would like to learn more about how Brexit may impact you, please visit our Practical Guidance: Brexit hub here.
And if you have any questions or would like to discuss your specific circumstances, please get in touch with your usual Blick Rothenberg contact or one of the partners on this page.