How Brexit affects British property owners in Spain

Hello and welcome back to the Meridional Team blog. This time we deal with one of the issues that most affects English property owners in Spain after Brexit.

As we already know, on 1 January 2021, the UK officially left the EU. This exit implies a series of legal changes that you need to be aware of if you own a property in Spain after Brexit.

However, both the process of purchasing property and the rights of property owners remain unchanged. Property rights are never tied to residency status.

All property owners in Spain after Brexit have the same rights and obligations. This is irrespective of where they come from.

What are the tax changes you need to be aware of if you own a property in Spain after Brexit?

Although from the point of view of real estate no changes in taxation for non-EU residentsHowever, there have been changes that affect English property owners in Spain after Brexit, in relation to the rate of income tax for non-EU residents who have a rental property.

As a resident of a non-EU country, the tax rate changed from 19% on the net income to be taxed to 24% on the full amount of the rent in your tax return. This happened after the previous tax rate of 19% expired. It all happened when the transition period ended on 31 December 2020. 

In other words, the tax rate is increased from 19% to 24% and, in addition, the deduction of expenses such as IBI, repairs, community expenses, interest, etc. is not allowed.

This is because Spain, along with other EU countries, distinguishes between nations belonging to the European Economic Area and non-EEA nations.

To better understand this point we will take a simplified example.

Income of €1,000 per week was generated for six months during the holiday season, that is a gross income of €24,000 per year.

If expenses of €14,000 had been incurred, and without taking into account allowances, a tax bill of €1,900 would have been paid before Brexit.

Therefore, if you own a property in Spain after Brexit that rises to €5,760, i.e. three times more.

How long can you stay in your Spanish property?

This is one of the changes that Brexit has brought about for property owners in Spain. As of 1 January 2021, the rules regarding the length of your stay in Spain have changed.. You can no longer stay more than 90 days in a row in a 180-day period.

Therefore, you can spend up to 90 days in Spain and then you must leave the country. You will then not be able to return to the Schengen area until 180 days have elapsed since your date of entry into Spain. This also applies elsewhere in the Schengen area.

Note that the 90 days start as soon as you arrive in a Schengen area location. This means that if you travel to Spain via France, for example, the time you spend in France counts towards the 90-day count.

If you want to stay longer, you simply cannot stay longer. However, you can divide the 90-day period into smaller parts. An example would be spending two periods of 45 days each in Spain.

The government may introduce new legislation to favour British homeowners. One example would be to allow them to spend more time in the country. However, so far, the government has not announced any new rules.

What happens if you are officially resident and own a property in Spain after Brexit?

If you have a Spanish residence permit (known as a Tarjeta de Identidad de Extranjero/TIE), your status is governed by the exit agreement between the UK and the EU. This means that your rights in Spain and the rest of the EU do not change after Brexit.

The Spanish residence permit is an identity card currently issued to non-EU residents of Spain. The card includes residents of the UK.

However, it is worth noting that the card issued to British nationals is slightly different from that issued to other third country nationals.

British nationals therefore have an easier route to residency than residents of other non-EU countries. 

British citizens who held a residence permit prior to 1 January 2021 will maintain their residence, work, study and Social Security rights. That is, as long as they were resident in Spain before that date.

For British nationals who had not acquired a residence permit before the effective date of Brexit, they will be subject to the general aliens regime.

Although for short trips you will not need a visa, a register of visitors from non-EU visa exempt countries is being introduced, for longer stays, you will need to apply for a visa if you wish to stay more than 90 days in each 180-day period in Spain. There are several visa options available. But almost all of them are very difficult to obtain as a non-EU citizen. 

Types of visas in Spain

If you were not resident in Spain on 1 January 2021, you need a visa. The easiest to obtain are:

• Residence visa for investment or Golden Visa
• Entrepreneurship visa
• Non-profit temporary residence visa

Residence visa for investment or Golden Visa

This is a residence visa issued to a non-EU citizen who intends to make a significant investment in the Spanish economy.

The visa offers the holder and his/her family members residence in Spain and visa-free access to the Schengen area.

In most cases, the Spanish Golden Visa is issued to someone buying real estate. However, they are also available to entrepreneurs who invest in a Spanish company, which is why they are also called Spanish Investor Visas.

Who can obtain a Golden Visa for Spain?

In order to obtain a Gold Visa for Spain, you must make one of the following investments:

• Acquire real estate in Spain for a minimum value of 500,000 euros. The property may be a single unit or several units, with an overall value of not less than 500,000 euros.
• Make an investment in Spanish public debt of at least 2,000,000 euros.
• Buy shares in a company or make a deposit in a Spanish bank of at least 1,000,000 euros.
• Invest in a new business that offers employment opportunities, contributes to scientific and/or technological innovation and has a relevant socio-economic impact on the area where the business will be developed.

Entrepreneurship visa

The entrepreneurial visa allows you to reside in Spain for a maximum period of two years as long as you start up an innovative project that is of interest to the country's economy.

In this sense, we are referring to a visa for non-residents who intend to start a business venture in EU territory (in our case in Spain) that benefits the general interest.

What do we mean by general interest?

Business projects need to fulfil a series of conditions in order to obtain this type of visa:

• Creating employment at least in the long term
• It must create good investment opportunities.
• High technological level
• Holding patents.

Non-profit temporary residence

It is perhaps the easiest to obtain and the most attractive, especially among retired British people.

A visa for temporary non-gainful residence is effectively issued to persons who can demonstrate that they have sufficient funds to support themselves in Spain, without working or studying.  

Instead, you have to prove that, either through savings or monthly income from pensions or investments, you can support yourself independently while living in Spain.

This means that you should be able to prove an annual income of approximately €27,115 (£23,436) as an individual and €33,894 (£29,300) as a couple to qualify for this type of visa.

Am I entitled to free health care if I am a permanent resident?

British citizens who are pensioners and entitled to UK NHS healthcare can transfer their entitlement to free healthcare to Spain using the S1.

This procedure involves presenting your S1 form at the INSS (Instituto Nacional de la Seguridad Social) office in Spain. Previously, it is necessary to have applied for a non-gainful residence visa at the Spanish Consulate General in London.

British citizens who have lost their entitlement to health cover in their home country and therefore cannot apply for S1 can access health care through private health insurance.

They can also access Andalusia's public health insurance through the special agreement.

If I am a non-resident in Spain, what happens to my healthcare?

Health care can be received thanks to the protocol of coordination of social security of the commercial agreement and royal decree law 38/2020The non-residents can receive emergency medical treatment during their temporary stay.

They only need a free UK Global Health Insurance Card (GHIC), or a valid European Health Insurance Card (EHIC).

The TSE card is valid until 30 June 2021 or until its expiry date, if the date exceeds 30 June 2021.

By now, you know a bit more about how Brexit affects English property owners. There have been some of the changes to your rights and obligations that you need to be aware of if you own a property in Spain after Brexit.

If you have any further questions please do not hesitate to contact us, Meridional will be happy to inform you.